NOTE TAXES

 

The Tax Cuts and Jobs Act (the “Tax Act”) was enacted on The Tax Act reduces the US federal corporate tax rate from to At we have completed our accounting for the tax effects of enactment of the Act.

 

As described below, we have made a reasonable estimate of the effects on our existing deferred tax balances as of We re-measured all of our deferred tax assets (“DTA”) and liabilities (“DTL”) based on the rates at which they are expected to reverse in the future. We recognized an income tax benefit of for the year ended related to adjusting our net deferred tax liability balance to reflect the new corporate tax rate.

 

In addition, DTAs/DTLs related to available for sale (“AFS”) securities unrealized losses that were revalued as of noted above created a “stranded tax effects” in Accumulated Other Comprehensive Income (“AOCI”) due enactment of the Tax Act. The issue arose due to the nature of GAAP recognition of tax rate change effects on the AFS DTA/DTL revaluation as an adjustment to income tax provision.

 

In FASB issued ASU - - As disclosed in Note the Company early adopted the provisions of the ASU - and recorded a reclassification adjustment of from AOCI to retained earnings for stranded tax effects related to AFS securities resulting from the newly enacted corporate tax rate. The amount of the reclassification was the difference between the percent historical corporate tax rate and the newly enacted percent corporate tax rate. See Statement of Changes in Stockholders Equity for additional details and reclassification impact due to impact of the ASU -

 

The accounting for the effects of the tax rate change on deferred tax balances is complete and provisional amounts were recorded for this item.

 

Reconciliation of income tax provision for the years ended and

 

		(Dollars in thousands)
		2017				2016				2015
Current Payable		$	3,137			$	3,179			$	3,462
Tax Act impact of the stranded tax effect related to deferred taxes for AFS securities			220				-				-
Tax Act impact on remaining deferred tax assets and liabilities			(309	)			-				-
Deferred Benefit			(174	)			(67	)			(19	)
Total Provision		$	2,874			$	3,112			$	3,443

 

The tax effects of deductible and taxable temporary differences that gave rise to significant portions of the net deferred tax assets and liabilities are as follows:

 

						(Dollars in thousands)
						2017				2016
Deferred Tax Assets:
Allowance for Loan Losses						$	1,847			$	2,653
Amortization of Core Deposit Intangible							9				28
Amortization of Intangibles							68				105
Postretirement Benefits							31				54
Net Unrealized Loss on Securities							357				607
Passthrough Entities							2				4
Stock-Based Compensation Expense							17				14
Other							92				181
Gross Deferred Tax Assets							2,423				3,646
Deferred Tax Liabilities:
Deferred Origination Fees and Costs							260				395
Depreciation							375				421
Mortgage Servicing Rights							191				272
Purchase Accounting Adjustments							1,340				2,111
Goodwill							379				578
Other							-				4
Gross Deferred Tax Liabilities							2,545				3,781
Net Deferred Tax Liabilities			(1	)		$	(122	)		$	(135	)

 

 

valuation allowance was established against the deferred tax assets in view of the Company’s ability to carryback taxes paid in previous years, cumulative history of earnings and anticipated future taxable income as evidenced by the Company’s earnings potential at and

 

Deferred taxes at and are included in other assets in the accompanying Consolidated Statement of Financial Condition.

 

A reconciliation of the federal income tax expense at statutory income tax rates and the actual income tax expense on income before taxes is shown below:

 

		(Dollars in thousands)
		2017								2016								2015
		Amount				Percent of Pre-tax Income				Amount				Percent of Pre-tax Income				Amount				Percent of Pre-tax Income
Provision at Statutory Rate		$	3,338				34.0	%		$	3,635				34.0	%		$	4,033				34.0	%
State Taxes (Net of Federal Benefit)			79				0.8				56				0.5				94				0.8
Effect of Tax-Free Income			(395	)			(4.0	)			(404	)			(3.8	)			(432	)			(3.6	)
BOLI Income			(162	)			(1.6	)			(163	)			(1.5	)			(158	)			(1.3	)
Merger Expenses			119				1.2				-				-				-				-
Stock Options - ISO			51				0.5				38				0.4				5				0.0
Effect of the enactment of the Tax Act			(89	)			(0.9	)			-				-				-				-
Other			(67	)			(0.7	)			(50	)			(0.5	)			(99	)			(0.9	)
Actual Tax Expense and Effective Rate		$	2,874				29.3	%		$	3,112				29.1	%		$	3,443				29.0	%

 

The Company’s federal and Pennsylvania income tax returns are longer subject to examination by federal or Commonwealth of Pennsylvania taxing authorities for years before As of and there were unrecognized tax benefits. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. There were interest or penalties accrued at and