Note 9 - Income Taxes

3 Months Ended

Mar. 31, 2018

9.	INCOME TAXES

The Tax Cuts and Jobs Act of

2017

(

“Tax Reform”) was enacted in

December 2017.

This legislation made significant changes in federal tax law, including a reduction in the corporate income tax rates, changes to net operating loss carryforwards and carrybacks and a repeal of the corporate alternative minimum tax. The legislation reduced the U.S. corporate income tax rate to

21%

beginning in

2018.

The provision for income taxes was

$0.1

million for both of the

three

-month periods ended

March 31, 2018

and

2017.

The Company’s effective tax rate was

16.4%

and

24.3%,

respectively, for the same periods. The effective tax rate is impacted by recurring permanent differences, such as those associated with bank-owned life insurance and tax-exempt investment and loan income. The reduced effective tax rate in the

first

quarter of

2018

compared to the

first

quarter of

2017

resulted from the reduction in the Company's statutory federal rate under Tax Reform.

The Company had a net deferred tax asset of

$5.9

million and

$5.6

million as of

March 31, 2018

and

December 31, 2017,

respectively. The increase in the net deferred tax asset resulted primarily from the impact of changes in the fair value of securities available-for-sale.