INCOME TAXES

3 Months Ended

Mar. 31, 2019

14.

INCOME TAXES

Significant components of the deferred tax assets and liabilities are as follows:

	March 31,		December 31,
	2019		2018
	(Dollars in thousands)
Deferred tax assets:
Loan loss reserves	$	4,319	$	4,293
Depreciation		426		363
Other real estate owned valuation		67		65
Unrealized loss on securities available for sale		208		1,005
Unrealized loss on securities held to maturity		177		184
Interest on nonaccrual loans		414		425
Net operating loss carryforward		—		409
Accrued bonuses		566		840
Other		47		125
Deferred tax assets		6,224		7,709
Deferred tax liabilities:
Deferred loan fees		1,525		1,512
Federal Home Loan Bank stock dividends		2,236		2,749
Mortgage servicing rights		1,569		1,603
Purchase accounting adjustment		167		62
Prepaid expenses		235		228
Deferred tax liabilities		5,732		6,154
Net deferred tax asset	$	492	$	1,555

As of March 31, 2019, the net deferred tax asset was $0.5 million, and as of December 31, 2018, the net deferred tax asset was $1.6 million.

The Company’s ultimate realization of the net deferred tax asset is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible. Management considers the nature and amount of historical and projected future taxable income, the scheduled reversal of deferred tax assets and liabilities, and available tax planning strategies in making this assessment. The amount of deferred taxes recognized could be impacted by changes to any of these variables.

Effective tax rates differ from the statutory federal income tax rate of 21% for 2019 and 2018 due to the following:

	For the Three Months Ended March 31,
	2019						2018
	Dollars			Rate			Dollars			Rate
	(Dollars in thousands)
Tax at statutory rate:	$	2,210			21.00	%	$	2,172			21.00	%
Increase (decrease) due to:
Tax exempt income		(60	)		(0.57	)%		(34	)		(0.33	)%
Life insurance		(81	)		(0.77	)%		(91	)		(0.88	)%
Stock compensation		(58	)		(0.55	)%		(128	)		(1.24	)%
Other		(143	)		(1.36	)%		(130	)		(1.26	)%
Income tax provision	$	1,868			17.75	%	$	1,789			17.29	%