(9) Income Taxes
The Tax Cuts and Jobs Act (the “Act”), which was enacted on December 22, 2017, made key changes to the U.S. tax law, including the reduction of the U.S. federal corporate tax rate from 34% to 21%. As ASC 740, Income Taxes, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted, the Company remeasured its deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is 21%. The deferred tax expense recorded related to the remeasurement of net deferred tax assets was $545 thousand. Additionally, the deferred tax effects on the unrealized holding losses for available for sale securities was also remeasured as a component of deferred income tax expense in the amount of $333 thousand.
The components of income tax expense for the years ended December 31, 2017 and 2016 are as follows (in thousands):
|
|
2017 |
|
|
2016 |
|
|||
|
Current |
|
$ |
3,360 |
|
|
$ |
2,818 |
|
|
Deferred |
|
|
281 |
|
|
|
686 |
|
|
Change in federal income tax rate |
|
|
878 |
|
|
|
|
|
|
Total income tax expense |
|
$ |
4,519 |
|
|
$ |
3,504 |
|
The difference between income tax expense and the amount computed by applying the statutory federal income tax rate to income before taxes for the years ended December 31, 2017 and 2016 is as follows (in thousands):
|
|
2017 |
|
|
2016 |
|
|||
|
Net income before taxes |
|
$ |
12,814 |
|
|
$ |
11,407 |
|
|
Statutory federal tax rate |
|
|
34 |
% |
|
|
34 |
% |
|
Tax on income at statutory federal tax rate |
|
|
4,357 |
|
|
|
3,878 |
|
|
Increase (decrease) resulting from: |
|
|
|
|
|
|
|
|
|
Federal income tax benefit of state income taxes |
|
|
(156 |
) |
|
|
(141 |
) |
|
Tax exempt income on loans |
|
|
(82 |
) |
|
|
(69 |
) |
|
Tax exempt income on investments |
|
|
(384 |
) |
|
|
(377 |
) |
|
Tax exempt income from bank-owned life insurance |
|
|
(144 |
) |
|
|
(146 |
) |
|
Tax exempt death benefits from bank-owned life insurance |
|
|
(226 |
) |
|
|
- |
|
|
Nondeductible expenses |
|
|
66 |
|
|
|
71 |
|
|
Change in federal income tax rate |
|
|
878 |
|
|
|
- |
|
|
State income tax |
|
|
460 |
|
|
|
399 |
|
|
Other |
|
|
(250 |
) |
|
|
(111 |
) |
|
Total |
|
$ |
4,519 |
|
|
$ |
3,504 |
|
The following summarizes the components of deferred taxes at December 31, 2017 and 2016 (in thousands).
|
|
2017 |
|
|
2016 |
|
|||
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
Loans and allowance for loan losses |
|
$ |
1,517 |
|
|
$ |
2,627 |
|
|
Accrued expenses |
|
|
- |
|
|
|
329 |
|
|
Deferred compensation |
|
|
282 |
|
|
|
326 |
|
|
Unrealized losses on investment securities available- for-sale |
|
|
709 |
|
|
|
1,259 |
|
|
Other |
|
|
497 |
|
|
|
690 |
|
|
Total deferred tax assets |
|
|
3,005 |
|
|
|
5,231 |
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
Core deposit intangible |
|
|
(391 |
) |
|
|
(782 |
) |
|
Depreciation |
|
|
(602 |
) |
|
|
(951 |
) |
|
Other |
|
|
(35 |
) |
|
|
(146 |
) |
|
Total deferred tax liabilities |
|
|
(1,028 |
) |
|
|
(1,879 |
) |
|
Net deferred income tax assets |
|
$ |
1,977 |
|
|
$ |
3,352 |
|