NOTE 13—INCOME TAXES
Allocation of income tax expense between current and deferred portions consisted of the following:
|
|
|
December 31, |
|
|||||||||
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
|
|
(dollars in thousands) |
|
|||||||||
|
Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal income tax |
|
$ |
4,665 |
|
|
$ |
7,381 |
|
|
$ |
4,948 |
|
|
State income tax |
|
|
863 |
|
|
|
1,742 |
|
|
|
1,191 |
|
|
Total current |
|
|
5,528 |
|
|
|
9,123 |
|
|
|
6,139 |
|
|
Deferred income tax expense |
|
|
2,263 |
|
|
|
(2,640 |
) |
|
|
380 |
|
|
|
|
$ |
7,791 |
|
|
$ |
6,483 |
|
|
$ |
6,519 |
|
The reasons for the difference between income tax expense and the amount computed by applying the statutory tax rates to income before taxes were as follows:
|
|
|
December 31, |
|
|||||||||
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
|
|
(dollars in thousands) |
|
|||||||||
|
Statutory federal tax rate |
|
|
34 |
% |
|
|
34 |
% |
|
|
34 |
% |
|
Income tax at statutory federal rate |
|
$ |
6,194 |
|
|
$ |
5,840 |
|
|
$ |
5,929 |
|
|
Increase (reduction) resulting from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
State income taxes, net of federal income tax benefit |
|
|
917 |
|
|
|
890 |
|
|
|
900 |
|
|
Tax exempt interest |
|
|
(207 |
) |
|
|
(172 |
) |
|
|
(160 |
) |
|
Increase in cash surrender value |
|
|
(183 |
) |
|
|
(100 |
) |
|
|
(100 |
) |
|
Tax reform expense |
|
|
1,000 |
|
|
|
— |
|
|
|
— |
|
|
Other |
|
|
70 |
|
|
|
25 |
|
|
|
(50 |
) |
|
Income tax expense |
|
$ |
7,791 |
|
|
$ |
6,483 |
|
|
$ |
6,519 |
|
|
Effective tax rate |
|
|
43 |
% |
|
|
38 |
% |
|
|
36 |
% |
The tax reform expense was due to a reduction in the value of our net deferred tax asset which was recorded as additional income tax expense as a result of the Tax Act that was enacted December 22, 2017.
The components of the net deferred tax asset were as follows:
|
|
|
December 31, |
|
|||||
|
|
|
2017 |
|
|
2016 |
|
||
|
|
|
(dollars in thousands) |
|
|||||
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
Management salary continuation accrued |
|
$ |
540 |
|
|
$ |
760 |
|
|
Allowance for loan losses |
|
|
3,290 |
|
|
|
4,976 |
|
|
Deferred compensation |
|
|
306 |
|
|
|
386 |
|
|
Interest on nonaccrual loans |
|
|
365 |
|
|
|
317 |
|
|
Other real estate owned |
|
|
406 |
|
|
|
321 |
|
|
Acquired assets |
|
|
(483 |
) |
|
|
171 |
|
|
Net operating loss |
|
|
1,660 |
|
|
|
2,460 |
|
|
Available for sale investment securities |
|
|
282 |
|
|
|
240 |
|
|
Other |
|
|
296 |
|
|
|
629 |
|
|
Total deferred tax assets |
|
$ |
6,662 |
|
|
$ |
10,260 |
|
|
Deferred tax liabilities |
|
|
|
|
|
|
|
|
|
Loan servicing rights |
|
|
2,438 |
|
|
|
3,646 |
|
|
Deferred loan costs |
|
|
216 |
|
|
|
310 |
|
|
Depreciation and amortization |
|
|
457 |
|
|
|
417 |
|
|
FHLB stock dividend |
|
|
73 |
|
|
|
106 |
|
|
Available for sale investment securities |
|
|
— |
|
|
|
— |
|
|
Other |
|
|
213 |
|
|
|
295 |
|
|
Total deferred tax liabilities |
|
$ |
3,397 |
|
|
$ |
4,774 |
|
|
Net deferred tax assets |
|
$ |
3,265 |
|
|
$ |
5,486 |
|