INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2017

INCOME TAXES

Schedule of income tax expense

Income tax expense was as follows (in thousands):

	2017		2016		2015
Current	$	2,748	$	1,082	$	629
Adjustment for Tax Cuts and Jobs Act		443		—		—
Deferred		(28)		(309)		(99)
	$	3,163	$	773	$	530

Schedule of year-end deferred tax assets and liabilities

Year-end deferred tax assets and liabilities were due to the following (in thousands).  No valuation allowance for the realization of deferred tax assets is considered necessary.

	2017		2016
Deferred tax assets
Allowance for loan losses	$	1,637	$	2,589
Other real estate owned		106		237
Nonaccrual loan interest		36		54
Accrued expenses		134		212
Acquisition market value adjustments		230		571
AMT tax credit		—		92
Capital loss carryforward		73		—
Unrealized loss on securities		265		492
Low income housing investments		124		150
Unearned income		190		362
Other		69		88
Deferred tax liabilities
Bank premises and equipment		(640)		(1,041)
FHLB stock		(808)		(1,308)
Prepaid expenses		(168)		(260)
Mortgage servicing rights		(309)		(434)
Core deposit intangibles		(78)		(180)
Acquisition loan loss recapture		(53)		(236)
Other		(92)		(194)
Net deferred tax asset (liability)	$	716	$	1,194

Schedule of reconciliation of effective tax rates and federal statutory rates applied to financial statement income

	2017		2016		2015
U. S. federal income tax rate	34.0	%	34.0	%	34.0	%
Changes from the statutory rate
Tax-exempt interest income	(9.0)		(14.1)		(16.3)
Historic and low income tax credits	(4.0)		(9.4)		(8.2)
Insurance captive	(1.9)		(3.3)		(3.7)
Non-deductible interest expense related to carrying tax-exempt investments	0.3		0.4		0.4
Non-deductible merger expenses	—		—		0.9
2017 Tax Cuts and Jobs Act	3.1		—		—
Other	0.3		0.7		0.1
	22.8	%	8.3	%	7.2	%