INCOME TAXES
Year-end deferred taxes are presented in the table below. As a result of the Tax Cuts and Jobs Act enacted on December 22, 2017 (discussed below), deferred taxes as of December 31, 2017 are based on the newly enacted U.S. statutory federal income tax rate of 21%. Deferred taxes as of December 31, 2016 are based on the previously enacted U.S. statutory federal income tax rate of 34%.
The following temporary differences gave rise to the net deferred tax asset position at December 31, 2017 and 2016:
|
| | | | | | | | |
(In Thousands) | | 2017 | | 2016 |
Deferred tax assets: | | |
| | |
|
Allowance for loan losses | | $ | 2,714 |
| | $ | 4,400 |
|
Deferred compensation | | 1,235 |
| | 1,840 |
|
Defined Pension | | 684 |
| | 1,450 |
|
Deferred Loan fees and discounts | | 211 |
| | 320 |
|
Investment securities allowance | | 45 |
| | 517 |
|
Unrealized loss on available for sale securities | | 14 |
| | 329 |
|
Other | | 727 |
| | 1,393 |
|
Total | | 5,630 |
| | 10,249 |
|
Deferred tax liabilities: | | |
| | |
|
Investment security accretion | | 95 |
| | 244 |
|
Depreciation | | 537 |
| | 588 |
|
Amortization | | 610 |
| | 1,020 |
|
Total | | 1,242 |
| | 1,852 |
|
Deferred tax asset, net | | $ | 4,388 |
| | $ | 8,397 |
|
No valuation allowance was established at December 31, 2017 and 2016, because of the Company’s ability to carry back capital losses to recover taxes paid in previous years and certain tax strategies, together with the anticipated future taxable income as evidenced by the Company’s earning potential. The Corporation is no longer subject to federal, state, and local examinations by tax authorities for years before 2014.
The provision or benefit for income taxes is comprised of the following for the year ended December 31, 2017, 2016, and 2015:
|
| | | | | | | | | | | | |
(In Thousands) | | 2017 | | 2016 | | 2015 |
Currently payable | | $ | 5,690 |
| | $ | 3,054 |
| | $ | 3,527 |
|
Deferred benefit | | (955 | ) | | 1,543 |
| | 209 |
|
Change in corporate tax rate | | 2,724 |
| | — |
| | — |
|
Total provision | | $ | 7,459 |
| | $ | 4,597 |
| | $ | 3,736 |
|
A reconciliation between the expected income tax or benefit and the effective income tax rate on income before income tax provision or benefit follows for the year ended December 31, 2017, 2016, and 2015:
|
| | | | | | | | | | | | | | | | | | | | | |
| | 2017 | | 2016 | | 2015 |
(In Thousands) | | Amount | | % | | Amount | | % | | Amount | | % |
Provision at expected rate | | $ | 5,859 |
| | 34.00 | % | | $ | 5,804 |
| | 34.00 | % | | $ | 5,996 |
| | 34.00 | % |
(Decrease) increase in tax resulting from: | | |
| | |
| | |
| | |
| | |
| | |
|
Tax-exempt income | | (811 | ) | | (4.71 | ) | | (1,092 | ) | | (6.40 | ) | | (1,492 | ) | | (8.46 | ) |
Tax credits | | (177 | ) | | (1.03 | ) | | (312 | ) | | (1.83 | ) | | (737 | ) | | (4.17 | ) |
Change in corporate tax rate | | 2,724 |
| | 15.81 |
| | — |
| | — |
| | — |
| | — |
|
Other, net | | (136 | ) | | (0.78 | ) | | 197 |
| | 1.16 |
| | (31 | ) | | (0.18 | ) |
Effective income tax provision and rate | | $ | 7,459 |
| | 43.29 | % | | $ | 4,597 |
| | 26.93 | % | | $ | 3,736 |
| | 21.19 | % |