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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Taxes |
Income Taxes | Note 9. Income Taxes The Tax Reform Act was enacted on December 22, 2017. The Tax Reform Act reduces the US federal corporate tax rate from 34% to 21%. At December 31, 2017, we had not completed our accounting for the tax effects of enactment of the Tax Reform Act. As described below, we have made a reasonable estimate of the effects on our existing deferred tax balances as of December 31, 2017. We re-measured all of our deferred tax assets (“DTA”) and liabilities (“DTL”) based on the rates at which they are expected to reverse in the future. We recognized an income tax expense of $0.6 million for the year ended December 31, 2017 related to adjusting our net deferred tax asset balance to reflect the new corporate tax rate. In addition, DTAs/DTLs related to AFS securities unrealized losses that were revalued as of December 31, 2017 noted above created a “stranded tax effects” in Accumulated Other Comprehensive Income (“AOCI”) due enactment of the Tax Act. The issue arose due to the nature of GAAP recognition of tax rate change effects on the AFS DTA/DTL revaluation as an adjustment to income tax provision. In February 2018, FASB issued ASU 2018-02 - Income Statement - Reporting Comprehensive Income (Topic 220). As disclosed in Note 1, the Company early adopted the provisions of the ASU 2018-02 and recorded a reclassification adjustment of $104,000 from AOCI to retained earnings for stranded tax effects related to AFS securities resulting from the newly enacted corporate tax rate. The amount of the reclassification was the difference between the 34 percent historical corporate tax rate and the newly enacted 21 percent corporate tax rate. See Statement of Changes in Stockholders Equity for additional details and reclassification impact due to impact of the ASU 2018-02. The components of income tax expense (benefit) are as follows for the years ended December 31, 2018 and 2017:
|  | 2018 |  | 2017
(dollars in thousands) |  |
Current income tax (benefit) expense: |  |  |  |  |  |
Federal |  | $ | (1,191) |  | $ | 328
State |  |  | 57 |  |  | 143
Total current tax expense |  |  | (1,134) |  |  | 471
Deferred income tax expense (benefit) : |  |  |  |  |  |
Federal |  |  | 1,228 |  |  | 443
State |  |  | 36 |  |  | (1)
Total deferred tax expense |  |  | 1,264 |  |  | 442
Total Income tax expense |  | $ | 130 |  | $ | 913
A reconciliation of income tax expense computed at the statutory rate of 21% at December 31, 2018 and 34% at December 31, 2017 to the actual income tax expense for the years ended December 31, 2018 and 2017 is as follows:
|  | 2018 |  | 2017 |
(dollars in thousands) |  |  |
Income tax expense at federal statutory rate |  | $ | 360 |  | $ | 620 |
Increase (decrease) resulting from: |  |  |  |  |  |  |
Tax-exempt income |  |  | (200) |  |  | (341) |
Bank owned life insureance |  |  | (101) |  |  | (68) |
State income taxes, net of Federal income tax benefit |  |  | 74 |  |  | 93 |
Federal rate change |  |  | — |  |  | 592 |
Other |  |  | (3) |  |  | 17 |
Total income tax expense (benefit) |  | $ | 130 |  | $ | 913 |
Deferred tax assets and liabilities resulting from the tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes at December 31, 2018 and 2017 are as follows:
|  | 2018 |  | 2017 |
(dollars in thousands) |  |  |
Deferred income tax benefits: |  |  |  |  |  |  |
Accrued deferred compensation |  | $ | 78 |  | $ | 92 |
Allowance for credit losses |  |  | 347 |  |  | 7 |
Nonaccrual interest |  |  | — |  |  | 375 |
Alternative minimum tax credits |  |  | — |  |  | 1,191 |
Net operating loss carryforward credits |  |  | 345 |  |  | 297 |
Accumulated depreciation |  |  | 4 |  |  | (15) |
Other real estate owned |  |  | — |  |  | 3 |
Reserve for unfunded commitments |  |  | 10 |  |  | 7 |
Accounting standard 310-20 |  |  | (76) |  |  |  |
Other temporary differences |  |  | 7 |  |  | 20 |
Accumulated securities premium accretion |  |  | 210 |  |  | 213 |
Net unrealized depreciation on investment securities available for sale |  |  | 467 |  |  | 239 |
Net deferred income tax benefits |  | $ | 1,392 |  | $ | 2,429 |
Management has determined that no valuation allowance is required as it believes it is more likely than not that all of the deferred tax assets will be fully realizable in the future. At December 31, 2018 and 2017, management believes there are no uncertain tax positions under ASC Topic 740 Income Taxes. Income tax expense was $0.13 million and $0.91 million at December 2018 and 2017, respectively. Included in the 2017 was a one-time $0.60 million income tax expense due to the Tax Reform Act which required us to revalue our deferred tax assets and liabilities at the new statutory tax rate upon enactment.

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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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