Note (15)—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 year ended December 31, 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 unaudited pro forma statements of income for the year to date and for prior year periods.

Allocation of federal and state income taxes between current and deferred portions is as follows:

	For the year ended
	December 31,
	2016		2015		2014
Current	$	12,476	$	1,321	$	1,427
Deferred		9,257		1,647		842
Total	$	21,733	$	2,968	$	2,269

Federal income tax expense for the year ended December 31, 2016, 2015 and 2014 differs from the statutory federal rate of 35% due to the following:

	For the year ended
	December 31,
	2016			2015		2014
Federal taxes calculated at statutory rate	$	5,061		$	—	$	—
Increase (decrease) resulting from:
State taxes, net of federal benefit		3,664			2,956		2,258
Conversion as of September 16, 2016 to C Corporation		13,181			—		—
Other		(173	)		12		11
Income tax expense, as reported	$	21,733		$	2,968	$	2,269

The components of the net deferred tax liability at December 31, 2016 and 2015, are as follows:

	For the year ended
	December 31,
	2016			2015
Deferred tax assets:
Allowance for loan losses	$	8,516		$	1,565
Amortization of core deposit intangible		996			107
Compensation related		7,552			1,120
Unrealized loss on securities		2,462			—
Other		2,430			39
Subtotal		21,956			2,831
Deferred tax liabilities:
FHLB stock dividends		(827	)		(135	)
Depreciation		(6,548	)		(661	)
Unrealized gain on securities		—			(205	)
Mortgage servicing rights		(12,558	)		(1,902	)
Other		(6,203	)		(641	)
Subtotal		(26,136	)		(3,544	)
Net deferred tax liability	$	(4,180	)	$	(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 2012 remain open to examination by the federal and state taxing jurisdictions to which the Company is subject.

In connection with our initial public offering, the Company entered into a tax sharing agreement with Mr. Ayers, dated September 15, 2016. In the event of an adjustment to taxable income for periods prior to termination of our S Corporation status, it is possible that Mr. Ayers would be liable for Federal or state income taxes for those prior periods. Pursuant to the agreement, upon our filing of any tax return (amended or otherwise), in the event of any restatement of our taxable income or pursuant to a determination by, or a settlement with, a taxing authority, for any period during which we were an S Corporation, we may be required to make a payment to Mr. Ayers in an amount equal to Mr. Ayers’ incremental tax liability, which amount may be material.