13.	INCOME TAXES

The provision for federal income taxes for the years ended

December 31,

consists of:

(Dollar amounts in thousands)	2018			2017

Current payable	$	2,403		$	3,929
Deferred		(241	)		293

Total provision	$	2,162		$	4,222

The tax effects of deductible and taxable temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows at

December 31,:

(Dollar amounts in thousands)	2018		2017

Deferred tax assets:
Allowance for loan and lease losses	$	1,327	$	1,210
Supplemental retirement plan		454		528
Investment security basis adjustment		18		18
Nonaccrual interest income		389		371
OREO adjustments		-		2
Accrued compensation		222		201
Other		-		86
Gross deferred tax assets		2,410		2,416

Deferred tax liabilities:
Premises and equipment		328		356
Net unrealized gain on securities		1		347
FHLB stock dividends		139		139
Intangibles		342		307
Mortgage servicing rights		75		71
Deferred origination fees, net		13		294
Acquisition fair value adjustments		275		250
Other		5		5
Gross deferred tax liabilities		1,178		1,769

Net deferred tax assets	$	1,232	$	647

valuation allowance was established at

December 31, 2018

and

2017,

in view of the Company’s ability to carry back to taxes paid in previous years and certain tax strategies, coupled with the anticipated future taxable income as evidenced by the Company's earnings potential.

The reconciliation between the federal statutory rate and the Company’s effective consolidated income tax rate for the years ended

December 31,

is as follows:

(Dollar amounts in thousands)	2018						2017
				% of						% of
				Pretax						Pretax
	Amount			Income			Amount			Income

Provision at statutory rate	$	3,065			21.0	%	$	4,651			34.0	%
Tax-exempt income		(622	)		(4.3	)%		(1,045	)		(7.6	)%
Nondeductible interest expense		27			0.2	%		32			0.2	%
Nondeductible merger-related expenses		-			-	%		43			0.3	%
Stock-based compensation		(37	)		(0.3	)%		(50	)		-0.4	%
Change in effective corporate tax rate		-			-	%		401			2.9	%
Other		(271	)		(1.8	)%		190			1.5	%

Actual tax expense and effective rate	$	2,162			14.8	%	$	4,222			30.9	%

ASC

740

prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than

not

that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-

not

recognition threshold is measured at the largest amount of benefit that is greater than

percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-

not

recognition threshold should be recognized in the

first

subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that

longer meet the more-likely-than-

not

recognition threshold should be derecognized in the

first

subsequent financial reporting period in which that threshold is

longer met.

December 22, 2017,

H.R.1,

commonly known as the Tax Cuts and Jobs Act (the “Act”), was signed into law. The Act includes many provisions that affected our income tax expense, including reducing our federal tax rate from

34%

21%

effective

January 1, 2018.

As a result of the rate reduction, we were required to re-measure, through income tax expense in the period of enactment, our deferred tax assets and liabilities using the enacted rate at which we expect them to be recovered or settled. The re-measurement of our net deferred tax asset resulted in additional

2017

income tax expense of

$401

thousand.

Also on

December 22, 2017,

the U.S. Securities and Exchange Commission (“SEC”) released Staff Accounting Bulletin

No.

118

(“SAB

118”

) to address any uncertainty or diversity of views in practice in accounting for the income tax effects of the Act in situations where a registrant did

not

have the necessary information available, prepared, or analyzed in reasonable detail to complete this accounting in the reporting period that includes the enactment date. SAB

118

allowed for a measurement period

not

to extend beyond

one

year from the Act’s enactment date to complete the necessary accounting.

December 31, 2018

and

December 31, 2017,

the Company had

ASC

740

unrecognized tax benefits. The Company does

not

expect the total amount of unrecognized tax benefits to significantly increase within the next

months. The Company recognizes interest and penalties on unrecognized tax benefits as a component of income tax expense.

The Company and the Bank are subject to U.S. federal income tax as well as an income tax in the states of Ohio and Florida, and the Bank is subject to a capital-based franchise tax in the state of Ohio. The Company and the Bank are

longer subject to examination by taxing authorities for years before

December 31, 2015.