Entity information:
NOTE
1
0
:     INCOME TAXES
 
As of
December 31,
201
7
and
2016,
retained earnings included approximately
$5,075,000
for which
no
deferred 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 unrecorded deferred income tax liability on the above amount was approximately
$1,294,000
as of both
December 31, 2017.
 
The provision for income taxes consists of:
 
   
December 31,
  
   
2017
    
2016
    
2015
  
                         
Taxes currently payable
   $
1,490,297
     $
1,889,673
     $
2,140,591
  
Deferred income taxes
    
68,340
      
123,091
      
320,738
  
Deferred income taxes related to 2017 Tax Act    
1,012,112
      
-
      
-
  
    $
2,570,749
     $
2,012,764
     $
2,461,329
  
 
The tax effects of temporary differences related to deferred taxes shown on the
December 31,
201
7
and
2016
balance sheets are:
 
 
   
December 31,
   
December 31,
 
   
2017
    
2016
  
Deferred tax assets:
               
Allowances for loan losses
  $
1,492,558
     $
1,952,433
  
Writedowns on foreclosed assets held for sale
   
86,610
      
681,281
  
Deferred loan fees/costs
   
168,961
      
141,418
  
Unrealized depreciation on available-for-sale securities
   
215,317
      
768,879
  
Tax Credits
   
445,151
      
441,908
  
Other
   
71,395
      
66,486
  
     
2,479,992
      
4,052,405
  
Deferred tax liabilities:
               
FHLB stock dividends
   
(32,035
 )    
(46,481
 )
Unrealized appreciation on interest rate swaps
   
(144,765
 )    
-
  
Accumulated depreciation
   
(544,560
 )    
(470,883
 )
Other
   
(31,458
 )    
(60,906
 )
     
(752,818
 )    
(578,270
 )
Net deferred tax asset
  $
1,727,174
     $
3,474,135
  
 
 
A reconciliation of income tax expense at the statutory rate to income tax expense at the Company
’s effective rate is shown below:
 
   
Years ended
  
   
December 31,
  
                         
   
2017
    
2016
    
2015
  
Computed at statutory rate
    
34.0
 %    
34.0
 %    
34.0
 %
Increase (reduction) in taxes resulting from:
                        
State financial institution tax and credits
    
(10.2%
 )    
(4.2%
 )    
(4.8%
 )
Cash surrender value of life insurance
    
(2.1%
 )    
(2.2%
 )    
(1.5%
 )
Tax exempt interest
    
(3.0%
 )    
(3.3%
 )    
(1.7%
 )
Impact of 2017 Tax Act
    
13.1
 %    
-
      
-
  
Other
    
1.5
 %    
2.2
 %    
4.1
 %
Actual effective rate
    
33.3
 %    
26.5
 %    
30.1
 %
 
 
The Tax Cuts and Jobs Act ("Tax Act") was signed into law on
December 22, 2017,
making several changes to U. S. corporate income tax laws, including reducing the corporate Federal income tax rate from
35%
to
21%
effective
January 1, 2018.
  U. S. GAAP requires that the impact of the provisions of the Tax Act be accounted for in the period of enactment and the Company recognized the income tax effects of the Tax Act in its
2017
financial statements.  The Tax Act is complex and requires significant detailed analysis.  During the preparation of the Company's
2017
income tax returns in
2018,
additional adjustments related to enactment of the Tax Act
may
be identified.  We do
not
currently expect significant adjustments will be necessary, but any further adjustments identified will be recognized in accordance with guidance contained in Staff Accounting Bulletin
No.
118
from the U. S. Securities and Exchange Commission.