Note (7)—Income taxes:

In connection with the initial public offering, as discussed in Note 1, the Company terminated its S-Corporation status and became a taxable entity (C Corporation) on September 16, 2016. As such, any periods prior to September 16, 2016 will only reflect an effective state income tax rate. The reported income tax expense for the three months and nine months ended September 30, 2016 reflects the increase in the deferred tax net liability of $13,181 from the conversion in the taxable status. The deferred tax net liability is the result of timing differences in the recognition of income/deductions for generally accepted accounting principles (GAAP) and tax purposes. The consolidated statements of income present pro forma statements of income for the current quarter and year to date and for prior year periods.

Allocation of federal and state income taxes between current and deferred portions is as follows (in thousands):

	For the three months ended
	September 30, 2016		September 30, 2015
Current	$	1,579	$	405
Deferred		13,193		453
Total	$	14,772	$	858

	For the nine months ended
	September 30, 2016		September 30, 2015
Current	$	2,707	$	1,330
Deferred		14,239		1,177
Total	$	16,946	$	2,507

Federal income tax expense for the three and nine months ended September 30, 2016 and state income tax expense for the three and nine months ended September 30, 2015 differs from the statutory federal and state rates of 35% and 6.50% due to the following (in thousands):

	For the three months ended
	September 30, 2016		September 30, 2015
Taxes calculated at statutory rate	$	1,160	$	857
Increase (decrease) resulting from:
Conversion as of September 16, 2016 to C Corporation		13,181		—
Other		431		1
Income tax expense, as reported	$	14,772	$	858

	For the nine months ended
	September 30, 2016		September 30, 2015
Taxes calculated at statutory rate	$	3,338	$	2,505
Increase (decrease) resulting from:
Conversion as of September 16, 2016 to C Corporation		13,181		—
Other		427		2
Income tax expense, as reported	$	16,946	$	2,507

The components of the net deferred tax liability at September 30, 2016 and December 31, 2015, are as follows (in thousands):

	September 30, 2016			December 31, 2015
Deferred tax assets:
Allowance for loan losses	$	9,120		$	1,565
Amortization of core deposit intangible		904			107
Compensation related		7,001			1,120
Other		2,679			39
Subtotal		19,704			2,831
Deferred tax liabilities:
FHLB stock dividends		(827	)		(135	)
Depreciation		(6,576	)		(661	)
Unrealized gain on securities		(3,649	)		(205	)
Mortgage servicing rights		(18,128	)		(1,902	)
Other		(5,981	)		(641	)
Subtotal		(35,161	)		(3,544	)
Net deferred tax liability	$	(15,457	)	$	(713	)

In recording the impact of the conversion to a C Corporation, the Company recorded a deferred income tax expense of $2,955 related to the unrealized gain on available for sale securities through the income statement in accordance with ASC 740-20-45-8; therefore, the amount shown in other comprehensive income has not been reduced by the above expense. This difference will remain in OCI until the underlying securities are sold or mature in accordance with the portfolio approach allowed under ASC 740.

Tax periods for all fiscal years after 2011 remain open to examination by the federal and state taxing jurisdictions to which the Company is subject.