NOTE 11 — INCOME TAXES

The components of the federal income tax provision (credit) for the years ended December 31 are as follows (dollars in thousands):


	2018		2017
Current tax expense	$	1,352	$	585
Adjustment of deferred taxes due to change in enacted tax rate		—		2,025
Deferred tax expense		874		2,929

Provision for income taxes	$	2,226	$	5,539

A summary of the source of differences between income taxes at the federal statutory rate and the provision (credit) for income taxes for the years ended December 31 is as follows (dollars in thousands):


	2018		2017
Tax expense at statutory rate	$	2,225	$	3,746
Increase (decrease) in taxes resulting from:
Tax-exempt interest		(97)		(133)
Adjustment of deferred taxes due to change in enacted tax rate		—		2,025
Nondeductible transaction expenses		138		17
Other		(40)		(116)

Provision for income taxes, as reported	$	2,226	$	5,539

Deferred income taxes are provided for the temporary differences between the financial reporting and tax bases of the Corporation’s assets and liabilities. The major components of net deferred tax assets at December 31 are as follows (dollars in thousands):


	2018		2017
Deferred tax assets:
NOL carryforward	$	2,634	$	1,580
Allowance for loan losses		1,078		948
Alternative Minimum Tax Credit		—		1,463
OREO		168		119
Tax credit carryovers		140		235
Deferred compensation		307		242
Pension liability		221		240
Stock compensation		92		79
Unrealized loss on securities		99		19
Purchase accounting adjustments		2,206		785
Other		808		63

Total deferred tax assets		7,753		5,773


Deferred tax liabilities:
Core deposit premium		(1,256)		(404)
FHLB stock dividend		(73)		(56)
Depreciation		(101)		(79)
Mortgage servicing rights		61		(240)
Other		(621)		(24)
Total deferred tax liabilities		(1,990)		(803)

Net deferred tax asset	$	5,763	$	4,970

The Corporation has reported net deferred tax assets of $5.763 million at December 31, 2018.

A valuation allowance is provided against deferred tax assets when it is more likely than not that some or all of the deferred tax asset will not be realized. The Corporation, as of December 31, 2018 had a net operating loss and tax credit carryforwards for tax purposes of approximately $12.5 million, and $1.7 million, respectively. As a result of the repeal of the corporate alternative minimum tax in the Tax Cuts and Jobs Act, any outstanding alternative minimum tax credits are believed to be utilized or refundable as of December 31, 2018. Therefore, the $1.6 million of alternative minimum tax credits, was reclassified to a current tax receivable included in other assets during the year. The Corporation evaluated the future benefits from these carryforwards as of December 31, 2018 and determined that it was “more likely than not” that they would be utilized prior to expiration. The net operating loss carryforwards expire twenty years from the date they originated. These carryforwards, if not utilized, will begin to expire in the year 2023. A portion of the NOL and credit carryforwards are subject to the limitations for utilization as set forth in Section 382 of the Internal Revenue Code. The annual limitation is $2.0 million for the NOL and the equivalent value of tax credits, which is approximately $.420 million. These limitations for use were established in conjunction with the recapitalization of the Corporation in December 2004. The Corporation will continue to evaluate the future benefits from these carryforwards in order to determine if any adjustment to the deferred tax asset is warranted.