NOTE 11: Income Taxes
Principal components of income tax expense as reflected in the consolidated statements of income are as follows:
|
|
|
Year Ended December 31, |
|
|||||||
|
(Dollars in thousands) |
|
2017 |
|
2016 |
|
2015 |
|
|||
|
Current taxes |
|
$ |
1,989 |
|
$ |
4,482 |
|
$ |
3,475 |
|
|
Deferred taxes |
|
|
9,405 |
|
|
(23) |
|
|
1,378 |
|
|
|
|
$ |
11,394 |
|
$ |
4,459 |
|
$ |
4,853 |
|
Income tax expense is comprised of the following items:
|
|
|
Year Ended December 31, |
|
|||||||||||||
|
|
|
|
|
|
Percent of |
|
|
|
|
Percent of |
|
|
|
|
Percent of |
|
|
|
|
|
|
|
Pre-tax |
|
|
|
|
Pre-tax |
|
|
|
|
Pre-tax |
|
|
(Dollars in thousands) |
|
2017 |
|
Income |
|
2016 |
|
Income |
|
2015 |
|
Income |
|
|||
|
Income tax computed at federal statutory rates |
|
$ |
6,288 |
|
35.0 |
% |
$ |
6,272 |
|
35.0 |
% |
$ |
6,084 |
|
35.0 |
% |
|
Tax effect of exclusion of interest income on obligations of states and political subdivisions |
|
|
(1,125) |
|
(6.3) |
|
|
(1,310) |
|
(7.3) |
|
|
(1,456) |
|
(8.4) |
|
|
Reduction of interest expense incurred to carry tax-exempt assets |
|
|
32 |
|
0.2 |
|
|
36 |
|
0.2 |
|
|
38 |
|
0.2 |
|
|
Increase in bank-owned life insurance |
|
|
(151) |
|
(0.8) |
|
|
(324) |
|
(1.8) |
|
|
(159) |
|
(0.9) |
|
|
State income taxes, net of federal tax benefit |
|
|
348 |
|
1.9 |
|
|
403 |
|
2.2 |
|
|
563 |
|
3.3 |
|
|
Amortization of investments in qualified affordable housing projects, net of federal tax benefit |
|
|
255 |
|
1.4 |
|
|
217 |
|
1.2 |
|
|
264 |
|
1.5 |
|
|
Tax credit on investments in qualified affordable housing projects |
|
|
(390) |
|
(2.2) |
|
|
(364) |
|
(2.0) |
|
|
(400) |
|
(2.3) |
|
|
Share-based compensation |
|
|
(597) |
|
(3.3) |
|
|
(476) |
|
(2.7) |
|
|
— |
|
— |
|
|
Reduction in net deferred tax asset due to change in federal statutory rate |
|
|
6,643 |
|
37.0 |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
Other |
|
|
91 |
|
0.5 |
|
|
5 |
|
— |
|
|
(81) |
|
(0.5) |
|
|
|
|
$ |
11,394 |
|
63.4 |
% |
$ |
4,459 |
|
24.8 |
% |
$ |
4,853 |
|
27.9 |
% |
The Corporation’s net deferred income taxes totaled $12.1 million and $21.5 million at December 31, 2017 and 2016, respectively. The tax effects of each type of significant item that gave rise to deferred taxes are:
|
|
|
December 31, |
|
||||
|
(Dollars in thousands) |
|
2017 1 |
|
2016 |
|
||
|
Deferred tax asset |
|
|
|
|
|
|
|
|
Allowances for loan losses and OREO losses |
|
$ |
9,004 |
|
$ |
14,035 |
|
|
Fair value adjustments related to CVBK acquisition |
|
|
2,123 |
|
|
3,953 |
|
|
Reserve for indemnification losses |
|
|
641 |
|
|
875 |
|
|
Deferred compensation |
|
|
1,383 |
|
|
2,005 |
|
|
Share-based compensation |
|
|
769 |
|
|
1,036 |
|
|
Interest on nonaccrual loans |
|
|
475 |
|
|
1,088 |
|
|
Cash flow hedges |
|
|
— |
|
|
22 |
|
|
Other |
|
|
2,363 |
|
|
3,722 |
|
|
Deferred tax asset |
|
|
16,758 |
|
|
26,736 |
|
|
Deferred tax liability |
|
|
|
|
|
|
|
|
Goodwill and other intangible assets |
|
|
(2,810) |
|
|
(3,848) |
|
|
Core deposit intangible |
|
|
(76) |
|
|
(307) |
|
|
Defined benefit plan |
|
|
(934) |
|
|
(116) |
|
|
Depreciation |
|
|
(632) |
|
|
(180) |
|
|
Cash flow hedges |
|
|
(43) |
|
|
— |
|
|
Net unrealized gain on securities available for sale |
|
|
(170) |
|
|
(746) |
|
|
Deferred tax liability |
|
|
(4,665) |
|
|
(5,197) |
|
|
Net deferred tax asset |
|
$ |
12,093 |
|
$ |
21,539 |
|
|
1 |
The deferred tax asset and liability values at December 31, 2017 have been re-measured as a result of the Act and the 21 percent federal corporate income tax rate that will apply to the Corporation’s future fiscal years. |
The Corporation files income tax returns in the U.S. federal jurisdiction and several states. With few exceptions, the Corporation is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years prior to 2014.