Income Taxes

12 Months Ended

Dec. 31, 2019

12.	INCOME TAXES

The consolidated provisions for income taxes for the years ended December 31, 2019 and 2018 were as follows:

	2019			2018
	(Dollars in Thousands)
Federal
Current	$	(54	)	$	(157	)
Deferred		1,100			859
Total federal		1,046			702
State
Current		166			59
Deferred		34			140
Total state		200			199
Total	$	1,246		$	901

The consolidated tax expense differed from the amount computed by applying the Company’s federal statutory income tax rate of 21.0% in 2019 and 2018 as described in the following table:

	2019			2018
	(Dollars in Thousands)
Income tax expense at federal statutory rate	$	1,220		$	712
Increase (decrease) resulting from:
Tax-exempt interest		(95	)		(119	)
Bank-owned life insurance		(65	)		(66	)
State income tax expense, net of federal income taxes		229			137
Other		(43	)		237
Total	$	1,246		$	901

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2019 and 2018 are presented below:

	2019		2018
	(Dollars in Thousands)
Deferred tax assets:
Allowance for loan losses	$	1,354	$	1,228
Deferred compensation		1,040		1,064
Deferred commissions and fees		337		308
Impairment of other real estate owned		52		99
Federal net operating loss carryforwards		655		1,549
State net operating loss carryforwards		270		280
Federal alternative minimum tax and general business credits carryforwards		107		167
Unrealized loss on securities available-for-sale		71		797
Unrealized loss on cash flow hedges		1		—
Other		630		621
Total gross deferred tax assets		4,517		6,113
Deferred tax liabilities:
Premises and equipment		1,205		888
Core deposit intangible		347		463
Limited partnerships		135		122
Other		79		31
Total gross deferred tax liabilities		1,766		1,504
Net deferred tax asset, included in other assets	$	2,751	$	4,609

As of December 31, 2019 and 2018, respectively, the Company had federal net operating loss carryforwards of $3.1 million and $7.4 million, and the Company had state net operating loss carryforwards of $5.9 million and $8.4 million for the same respective periods. In addition, as of December 31, 2019 and 2018, the Company had federal tax credit carryforwards of $0.1 million and $0.2 million, respectively. The federal and state net operating loss and federal tax credit carryforwards can be used to offset income in future periods and reduce income taxes payable in those future periods. The majority of these carryforwards will not begin to expire until 2032.

The Company files a consolidated income tax return with the federal government and the States of Alabama and Tennessee. ALC files several state income tax returns, with the majority of its non-Alabama income being apportioned to Mississippi. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and the states in which it filed for the years ended December 31, 2014 through 2019.

As of December 31, 2019, the Company had no unrecognized tax benefits related to federal or state income tax matters and does not anticipate any material increase or decrease in unrecognized tax benefits relative to any tax positions taken prior to December 31, 2019. As of December 31, 2019, the Company had accrued no interest and no penalties related to uncertain tax positions.