(9)    Income Taxes

The composition of income tax expense for the years ended December 31, 2017, 2016, and 2015 was as follows:

Applicable income tax expense for financial reporting purposes differs from the amount computed by applying the statutory federal income tax rate for the reasons noted in the table for the years ended December 31, 2017, 2016, and 2015 are as follows:

Income taxes as a percentage of earnings before income taxes as reported in the consolidated financial statements were 69.8% for the year ended December 31, 2017 compared to 34.0% and 34.8% for the years ended December 31, 2016 and 2015, respectively. The increase in the effective tax rate in 2017 over 2016 and 2015 reflects a $4.1 million write-down of the Company’s net deferred tax asset (DTA) in response to the enactment of the Tax Act and other planning initiatives by the Company. The write-down was recorded as additional income tax expense during the fourth quarter of 2017. The federal corporate income tax rate declined from 34% to 21% effective January 1, 2018 as a result to the Tax Act. The Company expects its future effective tax rate after the impact of tax exempt income to be approximately 18% to 19% compared to 34% in prior years. Additionally, as of December 31, 2017, the Company early adopted ASU 2018-02 Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income and elected to reclassify from accumulated other comprehensive income to retained earnings the stranded income tax effects in accumulated other comprehensive loss resulting from the Tax Act and additional tax planning initiatives as mentioned above.

The components of deferred tax assets and deferred tax liabilities at December 31, 2017 and 2016 are as follows:

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income of the appropriate character during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning initiatives in making this assessment. With the exception of certain capital losses generated during 2013 and 2014, it is management’s opinion that the Company will more likely than not realize the benefits of these temporary differences as of December 31, 2017 and, therefore, established a valuation reserve against the Company’s capital loss carry forward. Management arrived at this conclusion based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible. As indicated above, the Company generated approximately $219,000 of capital losses during 2013 and 2014 as a result of disposing of certain limited partnership interests. The capital losses will expire between 2018 and 2019, and it is management’s opinion that the Company will not more likely than not generate the capital gain income necessary to utilize the capital loss carry forwards before the capital losses expire. As such, the Company has established a $46,000 valuation reserve against its capital loss carry forward deferred tax asset.

The Company follows ASC Topic 740, Income Taxes, which addresses the accounting for uncertain tax positions. As of December 31, 2017, 2016, and 2015 the Company did not have any uncertain tax provisions.