NOTE

 

On comprehensive tax reform legislation known as the Tax Cuts and Jobs Act (the “Tax Reform Act”) was signed into law. The Tax Reform Act amends the Internal Revenue Code to reduce U.S. tax rates and modify policies, credits and deductions for individuals and businesses.

 

The Tax Reform Act permanently reduces the U.S. federal corporate income tax rate from to effective for tax years beginning after GAAP requires an adjustment to deferred taxes as a result of a change in the corporate tax rate in the period that the change is enacted, with the change recorded to the current year tax provision. Accordingly, the Company has remeasured its deferred tax assets and liabilities at the new tax rate and recorded a -time noncash tax expense of

 

The income tax

 

		2017				2016				2015
Income tax expense
Current		$	1,438			$	1,978			$	2,474
Deferred			504				235				(203	)
Total provision for income tax expense		$	1,942			$	2,213			$	2,271

 

A reconciliation of the income tax

 

		2017								2016								2015
Computed “expected” tax expense		$	2,756				34	%		$	3,437				34	%		$	2,806				34	%
Increase (decrease) in tax expense resulting from:
Federal income tax rate change			620				8	%			-				0	%			-				0	%
State tax expense, net of federal tax effect			331				4	%			404				4	%			348				4	%
Tax exempt interest			(1,452	)			-18	%			(923	)			-9	%			(569	)			-7	%
Disallowed interest expense			193				2	%			56				1	%			53				1	%
Incentive stock options			33				0	%			22				0	%			23				0	%
Cash surrender value of life insurance contracts			(285	)			-4	%			(255	)			-3	%			(184	)			-2	%
Officers life insurance expense			-				0	%			7				0	%			2				0	%
Excess tax benefit from stock compensation			(184	)			-2	%			(478	)			-5	%			-				0	%
Nondeductible merger expenses			173				2	%			-				0	%			143				2	%
Federal and state tax credits			(667	)			-8	%			(499	)			-5	%			(123	)			-1	%
Benefit of subsidiary net loss			-				0	%			-				0	%			(159	)			-2	%
Subsidiary disregarded for federal taxes			347				4	%			378				4	%			(88	)			-1	%
Others as a group			77				1	%			64				1	%			19				0	%
Total income tax expense		$	1,942				23	%		$	2,213				22	%		$	2,271				28	%

 

The Company files

 

The Company

 

During the year

 

Significant components of deferred tax assets as of

 

		2017				2016				2015
Organizational and start-up costs		$	98			$	188			$	231
Core deposit intangible			(215	)			(403	)			(513	)
Goodwill			(84	)			(109	)			(94	)
Acquisition fair value adjustments			30				344				1,206
Allowance for loan losses			1,876				2,083				1,286
Loan fees			60				240				355
Other real estate			-				19				70
Premises and equipment			(427	)			(691	)			(645	)
Unrealized (gain) loss on available for sale securities			(528	)			1,312				23
Non-accrual loans			170				264				228
Other			119				190				236
Total		$	1,099			$	3,437			$	2,383
State		$	114			$	418			$	326
Federal			985				3,019				2,057
Net deferred tax asset		$	1,099			$	3,437			$	2,383

 

In assessing the future realization of deferred tax assets, management considers whether it is more likely than that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

 

The Securities and Exchange Commission issued Staff Accounting Bulletin on which provides for a -year measurement period that allows businesses time to evaluate the financial statement implications of the Tax Reform Act. Companies are required to disclose in financial filings whether their accounting for the income tax effects of the Tax Reform Act is complete, incomplete but reasonably estimated, or incomplete with estimate provided. The measurement period allows businesses to gather the information necessary to prepare and analyze the income tax accounting effects of the Tax Reform Act on financial statements issued during the measurement period. During the measurement period, an entity need to reflect adjustments to provisional amounts previously recorded after obtaining, preparing, or analyzing additional information about facts and circumstances that existed as of the enactment date that, if known, would have affected the income tax effects initially reported as provisional amounts. Such adjustments to provisional amounts included in an entity

 

As noted above, the Company has recorded in income tax expense for the estimated impact of various provisions of the Tax Reform Act. The ultimate impact of the Tax Reform Act on the Company