Entity information:
11.
INCOME TAXES
 
On
December 22, 2017,
the Tax Cuts and Jobs Act of
2017
(
“
Tax Reform
”
) was enacted. This legislation makes significant change in federal tax law, including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks and a repeal of the corporate alternative minimum tax. The legislation reduced the U.S. corporate tax rate to
21%
beginning in
2018.
As a result of the law, the Company was required to re-value deferred tax assets and liabilities at the
21%
rate as of
December 31, 2017.
This re-valuation resulted in a
one
-time, non-cash charge to income tax expense of
$2.5
million
and a corresponding reduction in the net deferred tax asset. The other provisions of Tax Reform did
not
have a material impact on the
2017
consolidated financial statements.
 
The consolidated provisions for income taxes for the years ended
December
 
31,
2017
and
2016
were as follows:
 
   
2017
    
2016
  
   
(Dollars in
Thousands)
  
Federal
                
Current
   $
65
     $
30
  
Deferred
    
3,105
      
103
  
     
3,170
      
133
  
State
                
Current
    
143
      
19
  
Deferred
    
(278)
      
17
  
     
(135)
      
36
  
Total
   $
3,035
     $
169
  
 
The consolidated tax expense (benefit) differed from the amount computed by applying the Company's federal statutory income tax rate in
2017
and
2016
of
34.0%
,
as described in the
following table:
 
   
2017
    
2016
  
   
(Dollars in Thousands)
  
Income tax expense at federal statutory rate
   $
892
     $
475
  
Increase (decrease) resulting from:
                
Tax-exempt interest
    
(219
)
    
(217
)
Bank-owned life
insurance
    
(109
)
    
(106
)
State income tax expense, net of federal income taxes
    
54
      
29
  
Tax Reform adjustment    
2,471
      
—
  
Other
    
(54
)
    
(12
 )
Total
   $
3,035
     $
169
  
 
The tax effects of temporary differences that gave rise to significant portions of the
deferred tax assets and deferred tax liabilities as of
December 
31,
2017
and
2016
are presented below:
 
   
2017
    
2016
  
   
(Dollars in Thousands)
  
Deferred tax assets:
                
Allowance for loan losses
   $
1,197
     $
1,792
  
Deferred
compensation
    
1,045
      
1,603
  
Deferred commissions and fees
    
313
      
268
  
Impairment of other real estate owned
    
532
      
742
  
Federal net operating loss carryforwards
    
1,486
      
3,121
  
State net operating loss carryforwards
    
288
      
184
  
Federal alternative minimum tax and general business
credits carryforwards
    
340
      
279
  
Unrealized loss on securities available-for-sale    
400
      
872
  
Other
    
418
      
500
  
Total gross deferred tax assets
    
6,019
      
9,361
  
Deferred tax liabilities:
                
Premises and equipment
    
214
      
327
  
Limited partnerships
    
81
      
132
  
Cash flow hedges    
111
      
127
  
Other
    
24
      
41
  
Total gross deferred tax liabilities
    
430
      
627
  
Net deferred tax asset, included in other
assets
   $
5,589
     $
8,734
  
 
As of
December 31, 2017
and
2016,
the Company had
$2.1
million and
$3.6
million related to federal and state net operating loss and tax credit carryforwards that can be used to offset income in future periods and reduce
income taxes payable in those future periods.   The majority of these carry-forwards will
not
begin to expire until
2032.
  The remaining net deferred tax assets, which totaled
$3.5
million and
$5.2
million as of
December 31, 2017
and
2016,
respectively, do
not
have an expiration date.
 
The Company
’s determination of the realization of net deferred tax assets at
December 31, 2017
and
2016
was based on management’s assessment of all available positive and negative evidence.  As of both
December 31, 2017
and
December 31, 2016,
the Company was
not
in a
three
-year cumulative loss position.  In addition, the Company has positive evidence supporting the realization of its net deferred tax assets as of
December 31, 2017,
including the reversal of taxable temporary differences, a strong history of earnings, and tax planning strategies, including the conversion of tax-exempt investments to taxable investments to generate future taxable income to prevent tax attributes, such as net operating losses, from expiring unutilized.  Accordingly, a valuation allowance was
not
established as of
December 31, 2017
or
December 31, 2016.
 
The Company files a consolidated income tax return with the federal government and the State of Alabama. ALC files several state income tax returns, with the majority of its non-Alabama income being apportioned to Mississippi
. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and the states in which it files for the years ended
December 
31,
2013
through
2017.
 
As of
December 
31,
2017,
the Company had
no
unrecognized tax benefits related to federal or state income tax matters and does
not
anticipate any material increase or decrease in unrecognized tax benefits relative to any tax positions taken prior to
December
 
31,
2017.
As of
December 
31,
2017,
the Company had accrued
no
interest and
no
penalties related to uncertain tax positions.