Note 11 - Income Taxes

9 Months Ended

Sep. 30, 2018

11.	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 Company’s provision for income taxes was

$0.4

million for both of the

nine

-month periods ended

September 30, 2018

and

2017.

The Company’s effective tax rate was

29.8%

and

23.0%,

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 increased effective tax rate for the

nine

months ended

September 30, 2018

compared to the same period of

2017

resulted from the incurrence of acquisition-related expenses during the

third

quarter of

2018,

a portion of which are non-deductible under IRS regulations. This resulted in approximately

$0.2

million of additional tax expense during the

third

quarter of

2018.

The Company had a net deferred tax asset of

$5.5

million and

$5.6

million as of

September 30, 2018

and

December 31, 2017,

respectively. The decrease in the net deferred tax asset resulted primarily from the impact of the core deposit intangible related to the acquisition of TPB that occurred during the

third

quarter of

2018.