The components of income tax expense are as follows:

 

		Years Ended December 31,
		2017			2016			2015
Current:
Federal		$	408,086		$	3,363,290		$	2,484,372
State			100,861			577,401			473,037
Deferred (In 2017, includes $2,080,747 due to			6,445,865			(10,352)			255,638
Tax Cut and Jobs Act)		$	6,954,812		$	3,930,339		$	3,213,047

 

The Company's income tax expense differs from the amounts computed by applying the federal income tax statutory rates to income before income taxes. A reconciliation of the differences is as follows:

 

		Years Ended December 31,
		2017						2016						2015
		Amount			%			Amount		%				Amount			%
Income taxes at statutory rate		$	6,149,951			35	%	$	4,917,159			35	%	$	4,083,995			34	%
Tax-exempt income			(1,154,595)			(6)	%		(927,506)			(7)	%		(831,141)			(7)	%
Nondeductible expenses			233,925			1	%		130,609			1	%		161,176			1	%
State income tax, net of federal tax effect			65,560			-			375,311			3	%		307,951			3	%
Tax credits, net			(331,080)			(2)	%		(308,684)			(2)	%		(295,800)			(2)	%
Deferred tax adjustment due to Tax Cuts and Job Act			2,080,747			12	%		-			-			-			-
Other, net			(89,696)			-			(256,550)			(2)	%		(213,134)			(2)	%
		$	6,954,812			40	%	$	3,930,339			28	%	$	3,213,047			27	%

 

On December 22, 2017, the Tax Cuts and Jobs Act was enacted which permanently reduced the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the reduction in the U.S corporate income tax rate, the Company reevaluated its ending net deferred tax asset as of December 31, 2017 and recognized a tax expense of approximately $2.1 million.

 

The components of deferred income taxes included in the consolidated financial statements were as follows:

 

		December 31,
		2017			2016
Deferred tax assets:
Allowance for loan losses		$	2,096,866		$	2,897,479
Net operating loss carryover			1,500,867			2,315,140
Non-accrual loan interest			344,187			35,208
Other real estate			842,797			272,598
Unrealized loss on available-for-sale securities			150,298			642,629
Other			965,766			1,184,474
			5,900,781			7,347,528
Deferred tax liabilities:
Securities			(43,400)			(115,737)
Premises and equipment			(315,550)			(449,136)
Core deposit intangible			(204,103)			(231,845)
Goodwill			(989,011)			(1,228,960)
			(1,552,064)			(2,025,678)
Net deferred tax asset, included in other assets		$	4,348,717		$	5,321,850

 

With the acquisition of Wiggins in 2006, Baldwin in 2013, Bay in 2014 and Gulf Coast in 2017, the Company assumed federal tax net operating loss carryovers. These net operating losses are available to the Company and expire as follows :

 

Years		Amounts
2018		$	551,818
2019			396,985
2020-2032			4,464,304
2033			281,800
2034			147,617
2035-2036			92,114
		$	5,934,638

 

The Company follows the guidance of ASC Topic 740, Income Taxes, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As of December 31, 2017, the Company had no uncertain tax positions that it believes should be recognized in the financial statements. The tax years still subject to examination by taxing authorities are years subsequent to 2014. In February 2017, the Company was notified that its federal income tax return for 2014 was to be examined by the Internal Revenue Service. The examination was completed during 2017 with no findings.