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):


	2019		2018
Current tax expense	$	2,505	$	1,352
Deferred tax expense		1,355		874

Provision for income taxes	$	3,860	$	2,226

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):


	2019		2018
Tax expense at statutory rate	$	3,719	$	2,225
Increase (decrease) in taxes resulting from:
Tax-exempt interest		(110)		(97)
Nondeductible transaction expenses		—		138
Other		251		(40)

Provision for income taxes, as reported	$	3,860	$	2,226

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):


	2019		2018
Deferred tax assets:
NOL carryforward	$	2,147	$	2,634
Allowance for loan losses		1,144		1,078
Alternative Minimum Tax Credit		—		—
OREO		177		168
Tax credit carryovers		—		140
Deferred compensation		253		307
Pension liability		109		221
Stock compensation		75		92
Unrealized loss on securities		—		99
Purchase accounting adjustments		1,507		2,206
Lease liability		980		—
Other		894		808

Total deferred tax assets		7,286		7,753


Deferred tax liabilities:
Core deposit premium		(1,108)		(1,256)
FHLB stock dividend		(73)		(73)
Depreciation		—		(101)
Mortgage servicing rights		—		61
Right of use asset		(980)		—
Unrealized gain on securities		(272)		—
Other		(707)		(621)
Total deferred tax liabilities		(3,140)		(1,990)

Net deferred tax asset	$	4,146	$	5,763

The Corporation has reported net deferred tax assets of $4.146 million at December 31, 2019.

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, 2019 had a net operating loss carryforwards for tax purposes of approximately $10.2 million. 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, 2019. Therefore, the $1.6 million of alternative minimum tax credits, was reclassified to a current tax receivable included in other assets during 2018. 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.