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Income Taxes (Notes) | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES The income tax expense is as follows:
| For the years ended December 31,
| 2018 |  | 2017
Current expense (benefit) | $ | 378 |  |  | $ | (2,658 | )
Deferred expense | 6,328 |  |  | 7,361 |
Expense due to enactment of federal tax reform | — |  |  | 2,487 |
Total income tax expense | $ | 6,706 |  |  | $ | 7,190 |
A reconciliation of the provision for income taxes computed at the statutory federal corporate tax rate of 21% and 34% for 2018 and 2017, respectively, to the income tax expense in the consolidated statements of operations follows:
| For the years ended December 31,
| 2018 |  | 2017
Expense computed at the statutory federal tax rate | $ | 5,470 |  |  | $ | 5,506 |
State taxes and other, net | 1,564 |  |  | (204 | )
Bank owned life insurance | (328 | ) |  | (90 | )
ESOP/Share based compensation | — |  |  | (509 | )
Expense due to enactment of federal tax reform | — |  |  | 2,487 |
| $ | 6,706 |  |  | $ | 7,190 |
Effective income tax rate | 25.74 | % |  | 44.77 | %
Retained earnings at December 31, 2018 and 2017 include $14.9 million for which no deferred federal income tax liability has been recorded. This amount represents an allocation of income to bad debt deductions for tax purposes alone. The net deferred tax asset is as follows:
| December 31,
| 2018 |  | 2017
Gross Deferred tax assets |  |  |
Allowance for loan losses | $ | 2,279 |  |  | $ | 2,258 |
Alternative minimum tax, general business credit and net operating loss carryforwards | 6,669 |  |  | 11,864 |
Tax deductible goodwill and core deposit intangible | 561 |  |  | 801 |
Other | 1,256 |  |  | 1,395 |
| 10,765 |  |  | 16,318 |
Gross Deferred tax liabilities |  |  |
Net deferred loan origination costs | (1,186 | ) |  | (1,255 | )
Purchase accounting adjustments | (1,673 | ) |  | (1,744 | )
Other | (649 | ) |  | (619 | )
Unrealized gain on securities | (1,022 | ) |  | (137 | )
| (4,530 | ) |  | (3,755 | )
| $ | 6,235 |  |  | $ | 12,563 |
As of December 31, 2018 and 2017, the Company’s net deferred tax asset (“DTA”) was $6.2 million and $12.6 million, respectively. On December 22, 2017, H.R. 1, commonly known as the Tax Cuts and Job Act (the "Act"), was signed into law. Among other things, the Act reduces our corporate federal tax rate from 34% to 21% effective January 1, 2018. As a result, we were required to re-measure, through income tax expense 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 tax expense of $2.5 million for the year ended December 31, 2017. A DTA valuation allowance is required under ASC 740 when the realization of a DTA is assessed and the assessment indicates that it is “more likely than not” (i.e., more than 50% likely) that all or a portion of the DTA will not be realized. All available evidence, both positive and negative must be considered to determine whether, based on the weight of that evidence, a valuation allowance against the net DTA is required. Objectively verifiable evidence is assigned greater weight than evidence that is not objectively verifiable. The valuation allowance is analyzed quarterly for changes affecting the DTA. The Company’s ability to realize the DTA is dependent upon the generation of future taxable income during the periods in which the tax attributes underlying the DTA become deductible. The amount of the DTA that will ultimately be realized will be impacted by the Company’s future taxable income, any changes to the many variables that could impact future taxable income and the then applicable corporate tax rate. As of December 31, 2018 and 2017, management determined that it is more likely than not that the Company will be able to utilize the entire DTA. At December 31, 2018, the Company had a federal net operating loss carryforward of $1.2 million, which will begin to expire in 2033 and a federal tax credit carryforward of $1.3 million, which will begin to expire in 2022. In addition, the Company had a $3.1 million alternative minimum tax credit carryforward that can be carried forward indefinitely, which is now carried as tax receivables since under new federal law of the Company expects to recover the entire amount by the end of 2021 via reduction of regular tax liability or refund. In addition, at December 31, 2018, the Company had a federal net operating loss carryforward of $7.5 million relating to its acquisition of Downers Grove National Bank, which is subject to utilization limitations under Section 382 of the Internal Revenue Code, and will begin to expire in 2030, and $225,000 of alternative minimum tax credit carryforward that does not expire and is subject to utilization limitations under Section 382 of the Internal Revenue Code. At December 31, 2018, the Company had a state net operating loss carryforward for the State of Illinois of $58.5 million, which will begin to expire in 2022. At December 31, 2017, the Company early adopted ASU 2018-02 and reclassified out of retained earnings and into accumulated other comprehensive income $60,000 of tax (benefit) that was recorded to income tax expense at December 22, 2017 due to re-measuring to 21% deferred taxes on available for sale securities. Unrecognized Tax Benefits A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| December 31,
| 2018 |  | 2017
Beginning of year | $ | 129 |  |  | $ | 57 |
Additions based on tax positions related to the current year | 85 |  |  | 60 |
Additions for tax positions of prior years | 4 |  |  | 12 |
Reductions due to the statute of limitations and reductions for tax positions of prior years | (20 | ) |  | — |
End of year | $ | 198 |  |  | $ | 129 |
The Company does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months. The Company recognizes interest and/or penalties related to income tax matters in income tax expense. At December 31, 2018 and 2017, the Company has immaterial amounts accrued for potential interest and penalties. The Company and its subsidiary are subject to U.S. federal income tax as well as income tax of the various states where the Company does business. The Company is no longer subject to examination by the federal taxing authorities for years before 2015 and the Illinois taxing authorities for years before 2015.

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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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