Note 9: Income Taxes
The provision for income taxes includes these components:
| |
|
|
Years Ended December 31,
|
|
| |
|
|
2017
|
|
|
2016
|
|
|
Federal taxes currently payable
|
|
|
|
$ |
157 |
|
|
|
|
$ |
148 |
|
|
|
Federal deferred income taxes
|
|
|
|
|
(239) |
|
|
|
|
|
117 |
|
|
|
Federal income tax (benefit) expense
|
|
|
|
$ |
(82) |
|
|
|
|
$ |
265 |
|
|
| |
In lieu of state income taxes, the Company pays a franchise tax. Franchise tax for 2017 and 2016 was $108 and $96, respectively.
A reconciliation of federal income tax expense at the statutory rate to the Company’s actual federal income tax expense is shown below:
| |
|
|
Years Ended December 31,
|
|
| |
|
|
2017
|
|
|
2016
|
|
|
Computed at the statutory rate of 34%
|
|
|
|
$ |
88 |
|
|
|
|
$ |
587 |
|
|
| Increase (decrease) resulting from |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax-exempt BOLI income
|
|
|
|
|
(16) |
|
|
|
|
|
(16) |
|
|
|
Death benefit
|
|
|
|
|
— |
|
|
|
|
|
(318) |
|
|
|
ESOP
|
|
|
|
|
36 |
|
|
|
|
|
— |
|
|
|
Other
|
|
|
|
|
5 |
|
|
|
|
|
12 |
|
|
|
Tax reform adjustment
|
|
|
|
|
(195) |
|
|
|
|
|
— |
|
|
|
Actual federal income tax (benefit) expense
|
|
|
|
$ |
(82) |
|
|
|
|
$ |
265 |
|
|
| |
The tax effects of temporary differences related to the deferred federal tax liability shown on the balance sheets were:
| |
|
|
December 31,
|
|
| |
|
|
2017
|
|
|
2016
|
|
| Deferred tax assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
|
$ |
248 |
|
|
|
|
$ |
386 |
|
|
|
Deferred compensation
|
|
|
|
|
190 |
|
|
|
|
|
226 |
|
|
|
Charitable contributions
|
|
|
|
|
96 |
|
|
|
|
|
— |
|
|
|
Valuation on foreclosed assets
|
|
|
|
|
— |
|
|
|
|
|
9 |
|
|
|
Other assets
|
|
|
|
|
16 |
|
|
|
|
|
6 |
|
|
| |
|
|
|
|
550 |
|
|
|
|
|
627 |
|
|
| Deferred tax liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB stock basis difference
|
|
|
|
|
(87) |
|
|
|
|
|
(140) |
|
|
|
Depreciation
|
|
|
|
|
(113) |
|
|
|
|
|
(124) |
|
|
|
FHLB lender risk account receivable
|
|
|
|
|
(665) |
|
|
|
|
|
(917) |
|
|
| |
|
|
|
|
(865) |
|
|
|
|
|
(1,181) |
|
|
|
Net deferred federal tax liability
|
|
|
|
$ |
(315) |
|
|
|
|
$ |
(554) |
|
|
| |
Retained earnings at December 31, 2017 and 2016, includes approximately $559, for which no deferred federal income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which would be subject to the then-current corporate income tax rate. The deferred federal income tax liabilities on the preceding amount that would have been recorded if they were expected to reverse into taxable income in the foreseeable future was approximately $190 at December 31, 2017 and 2016.
The Tax Cuts and Jobs Act (“Tax Act”) was enacted on December 22, 2017. Among other changes, the Tax Act reduces the US Federal corporate tax rate from 34% to 21% For deferred tax assets and liabilities, amounts were remeasured based on the rates expected to reverse in the future, which is now 21%. As a result, the Company realized a reduction in income tax expense of $195 recognized for the year ended December 31, 2017.