Income Taxes

12 Months Ended

Dec. 31, 2019

NOTE 18 – INCOME TAXES

The provision for income taxes (credit) consists of the following:

		2019			2018			2017
Current expense	$	7,626		$	6,123		$	9,451
Deferred expense (benefit)		(311	)		(409	)		999
TOTALS	$	7,315		$	5,714		$	10,450

Effective tax rates differ from federal statutory rate of 21% in 2019 and 2018 and 35% in 2017 that were applied to income before income taxes due to the following:

		2019		2018			2017
Statutory tax	$	9,046		$	8,039		$	11,606
Effect of nontaxable interest		(1,655	)		(1,439	)		(2,054	)
Bank owned life insurance, net		(171	)		(182	)		(291	)
Tax credits		3			24			(371	)
Effect of nontaxable insurance premiums		(204	)		(188	)		(348	)
Stock compensation		(100	)		(486	)		0
Impact of enactment of federal tax reform		0			0			1,793
Nondeductible acquisition costs		0			0			70
Other		396			(54	)		45
ACTUAL TAX	$	7,315		$	5,714		$	10,450

Deferred tax assets (liabilities) are comprised of the following:

		2019			2018
Deferred tax assets:
Allowance for credit losses	$	3,032		$	2,837
Net unrealized loss on securities available for sale		0			1,040
Deferred and accrued compensation		1,194			1,065
Deferred loan fees and costs		584			580
Nonaccrual loan interest income		429			432
Other-than-temporary impairment		0			25
Restricted stock		456			431
Lease liabilities		669			0
Other		46			94
Gross deferred tax assets	$	6,410		$	6,504

Deferred tax liabilities:
Depreciation and amortization	$	(577	)	$	(467	)
Net unrealized gain on securities available for sale		(2,612	)		0
Federal Home Loan Bank dividends		(658	)		(658	)
Purchase accounting adjustments		(359	)		(552	)
Mortgage servicing rights		(363	)		(308	)
Prepaid expenses		(224	)		(204	)
Lease right of use asset		(655	)		0
Other		0			(12	)
Gross deferred tax liabilities		(5,448	)		(2,201	)
NET DEFERRED TAX ASSET	$	962		$	4,303

No valuation allowance for deferred tax assets was recorded at December 31, 2019 and 2018.

At December 31, 2019 and December 31, 2018, the Company had no unrecognized tax benefits recorded. The Company does not expect the amount of unrecognized tax benefits to significantly change within the next twelve months.

The Company is subject to U.S. federal income tax. The Company is no longer subject to examination by the federal taxing authority for years prior to 2016. The tax years 2016—2018 remain open to examination by the U.S. taxing authority.

In December of 2017, H.R.1, commonly known as the Tax Cuts and Jobs Act (the “Act”), was signed into law. The Act included several provisions that affected the Company’s federal income tax expense, which reduced the federal income tax rate to 21% effective January 1, 2018. As a result of the rate reduction, the Company was required to re-measure, through income tax expense in the period of enactment, the deferred tax assets and liabilities using the enacted rate at which these items are expected to be recovered or settled. The re-measurement of the Company’s net deferred tax asset resulted in additional income tax expense of $1.8 million in 2017.