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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income tax expense consists of the following:
|  | Year Ended December 31,
|  | 2018 |  | 2017 |  | 2016
|  | (In Thousands)
Current: |  |  |  |  |  |
Federal |  | $ | 729 |  |  | $ | 131 |  |  | $ | 2,839 |
State |  | 1,054 |  |  | 448 |  |  | 425 |
Current tax expense |  | 1,783 |  |  | 579 |  |  | 3,264 |
Deferred: |  |  |  |  |  |
Federal |  | (367 | ) |  | 1,657 |  |  | (1,000 | )
State |  | (65 | ) |  | 90 |  |  | (108 | )
Deferred tax (benefit) expense |  | (432 | ) |  | 1,747 |  |  | (1,108 | )
Total income tax expense |  | $ | 1,351 |  |  | $ | 2,326 |  |  | $ | 2,156 |
Deferred income tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax basis. Deferred tax assets and liabilities are measured using enacted tax rates to apply to taxable income in the period in which the temporary differences are expected to be recovered or settled. Effective January 1, 2018, the enactment of the Tax Cuts and Jobs Act (the “Act”) reduced the corporate federal income tax rate to 21% from 35%, which required the Corporation to revalue its deferred taxes as of December 31, 2017. The revaluation resulted in a $629,000 reduction to the Corporation’s net deferred tax assets with a corresponding increase to income tax expense during the year ended December 31, 2017. Net deferred tax assets are included in accrued interest receivable and other assets in the Consolidated Balance Sheets. On December 22, 2017, the SEC issued Staff Accounting Bulletin 118 (“SAB 118”), which provides guidance on accounting for the Act’s impact. SAB 118 provides a measurement period, which in no case should extend beyond one year from the Act’s enactment, during which a company acting in good faith may complete the accounting for the impacts of the Act. In accordance with SAB 118, a company will reflect the income tax effects of the Act in the reporting period in which the accounting is complete. The significant components of the Corporation’s deferred tax assets and liabilities were as follows:
|  | December 31, 2018 |  | December 31, 2017
|  | (In Thousands)
Deferred tax assets: |  |  |  |
Allowance for loan and lease losses |  | $ | 5,424 |  |  | $ | 4,795 |
SBA recourse reserve |  | 785 |  |  | 729 |
Deferred compensation |  | 1,045 |  |  | 482 |
State net operating loss carryforwards |  | 571 |  |  | 615 |
Tax credit carryforwards |  | 1,373 |  |  | — |
Non-accrual loan interest |  | 1,472 |  |  | 942 |
Capital loss carryforwards |  | 22 |  |  | 21 |
Unrealized losses on securities |  | 579 |  |  | 423 |
Other |  | 68 |  |  | 450 |
Total deferred tax assets before valuation allowance |  | 11,339 |  |  | 8,457 |
Valuation allowance |  | — |  |  | — |
Total deferred tax assets |  | 11,339 |  |  | 8,457 |
Deferred tax liabilities: |  |  |  |
Leasing and fixed asset activities |  | 6,965 |  |  | 5,338 |
Loan servicing asset |  | 358 |  |  | 471 |
Other |  | 844 |  |  | 64 |
Total deferred tax liabilities |  | 8,167 |  |  | 5,873 |
Net deferred tax asset |  | $ | 3,172 |  |  | $ | 2,584 |
The tax effects of unrealized gains and losses on securities are components of other comprehensive income. A reconciliation of the change in net deferred tax assets to deferred tax expense is as follows:
|  | December 31, 2018 |  | December 31, 2017 |  | December 31, 2016
|  | (In Thousands)
Change in net deferred tax assets |  | $ | 588 |  |  | $ | (1,468 | ) |  | $ | 1,419 |
Deferred taxes allocated to other comprehensive income |  | (156 | ) |  | (279 | ) |  | (311 | )
Deferred income tax benefit (expense) |  | $ | 432 |  |  | $ | (1,747 | ) |  | $ | 1,108 |
Realization of the deferred tax asset over time is dependent upon the Corporation generating sufficient taxable earnings in future periods. In making the determination that the realization of the deferred tax was more likely than not, the Corporation considered several factors including its recent earnings history, its expected earnings in the future, appropriate tax planning strategies and expiration dates associated with operating loss carry forwards. The Corporation had state net operating loss carryforwards of approximately $9.1 million and $9.9 million at December 31, 2018 and 2017, respectively, which can be used to offset future state taxable income. The Corporation believes it will be able to fully utilize its Wisconsin state net operating losses under this law and therefore no valuation allowance has been established as of December 31, 2018. The provision for income taxes differs from that computed at the federal statutory corporate tax rate as follows:
|  | Year Ended December 31,
|  | 2018 |  | 2017 |  | 2016
|  | (Dollars in Thousands)
Income before income tax expense |  | $ | 17,654 |  |  | $ | 14,231 |  |  | $ | 17,065 |
Tax expense at statutory federal rate of 21%, 35% and 35% applied to income before income tax expense, respectively |  | $ | 3,707 |  |  | $ | 4,981 |  |  | $ | 5,973 |
State income tax, net of federal effect |  | 803 |  |  | 511 |  |  | 206 |
Tax-exempt security and loan income, net of TEFRA adjustments |  | (847 | ) |  | (1,045 | ) |  | (1,114 | )
Bank-owned life insurance |  | (250 | ) |  | (438 | ) |  | (341 | )
Tax credits, net |  | (2,157 | ) |  | (2,390 | ) |  | (2,696 | )
Deferred tax revaluation adjustment |  | — |  |  | 629 |  |  | — |
Other |  | 95 |  |  | 78 |  |  | 128 |
Total income tax expense |  | $ | 1,351 |  |  | $ | 2,326 |  |  | $ | 2,156 |
Effective tax rate |  | 7.65 | % |  | 16.34 | % |  | 12.63 | %
There were no uncertain tax positions outstanding as of December 31, 2018 and 2017. As of December 31, 2018, tax years remaining open for the State of Wisconsin tax were 2014 through 2017. Federal tax years that remained open were 2015 through 2017. As of December 31, 2018, there were also no unrecognized tax benefits that are expected to significantly increase or decrease within the next twelve months.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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