NOTE 13-Income Taxes
The following table presents the provision for income taxes for the years ended December 31, 2017, 2016 and 2015.
|
|
||||||
|
(dollars in thousands) |
2017 |
2016 |
2015 |
|||
|
Current tax provision |
||||||
|
Federal |
$ |
6,151 |
$ |
6,221 |
$ |
4,827 |
|
State |
466 | 686 | 417 | |||
|
Total current tax provision |
6,617 | 6,907 | 5,244 | |||
|
|
||||||
|
Deferred tax expense (benefit) |
||||||
|
Federal |
3,211 | (838) | (376) | |||
|
State |
76 | (183) | (55) | |||
|
Total deferred tax expense (benefit) |
3,287 | (1,021) | (431) | |||
|
Total tax provision |
$ |
9,904 |
$ |
5,886 |
$ |
4,813 |
The differences between the effective income tax rate and the Federal statutory income tax rate for the years ended December 31, 2017, 2016 and 2015 are shown below.
|
|
2017 |
2016 |
2015 |
|||
|
Statutory tax rate |
35.0 |
% |
35.0 |
% |
35.0 |
% |
|
Increase (decrease) resulting from: |
||||||
|
Tax-exempt interest income |
(2.6) | (3.6) | (4.7) | |||
|
Bank owned life insurance income |
(1.6) | (1.6) | (1.5) | |||
|
State income taxes, net of federal tax benefit |
1.6 | 1.7 | 1.5 | |||
|
Other, net |
0.2 | (0.5) | (0.1) | |||
|
Change in enacted tax rate |
12.6 | 0.0 | 0.0 | |||
|
Effective income tax rate |
45.2 |
% |
31.0 |
% |
30.2 |
% |
On December 22, 2017, the Tax Cuts and Jobs Act was signed into law reducing the federal tax rate to 21 percent beginning on January 1, 2018. The revaluation of net deferred tax assets as of December 22, 2017 resulted in $2,755,000 of additional tax expense on the date of enactment. The impact on the 2017 effective tax rate is shown in the table above.
Significant components of the Corporation’s net deferred tax asset, included in other assets as of December 31, 2017 and 2016 are shown below.
|
(dollars in thousands) |
2017 | 2016 | |||
|
Deferred tax assets |
|||||
|
Allowance for loan losses |
$ |
3,954 |
$ |
5,672 | |
|
Deferred compensation |
1,135 | 1,755 | |||
|
Low-income housing partnerships |
79 | 312 | |||
|
Foreclosed real estate |
0 | 334 | |||
|
Acquisition accounting adjustments |
115 | 218 | |||
|
Net unrealized losses on available-for-sale securities |
255 | 578 | |||
|
Acquired net operating loss carryforwards |
131 | 347 | |||
|
Other |
32 | 421 | |||
|
Total deferred tax assets |
$ |
5,701 |
$ |
9,637 | |
|
|
|||||
|
Deferred tax liabilities |
|||||
|
Deferred loan fees |
$ |
475 |
$ |
528 | |
|
Depreciation |
310 | 565 | |||
|
Other |
201 | 391 | |||
|
Total deferred tax liabilities |
$ |
986 |
$ |
1,484 | |
|
Net deferred tax assets |
$ |
4,715 |
$ |
8,153 |
Based on the level of historical income projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes that, as of December 31, 2017, it is more likely than not that the Corporation will realize the benefits of its deferred tax assets.