13.	INCOME TAXES

The Tax Cuts and Jobs Act of

2017

(“Tax Reform”) was enacted in

December 2017.

This legislation made significant changes in federal tax law, including a reduction in the corporate income tax rates, changes to net operating loss carryforwards and carrybacks and a repeal of the corporate alternative minimum tax. The legislation reduced the U.S. corporate income tax rate to

21%

beginning in

2018.

The consolidated provisions for income taxes for the years ended

December

31,

2018

and

2017

were as follows:

	2018			2017
	(Dollars in Thousands)
Federal
Current	$	(157	)	$	65
Deferred		859			3,105
Total federal		702			3,170
State
Current		59			143
Deferred		140			(278)
Total state		199			(135)
Total	$	901		$	3,035

The consolidated tax expense (benefit) differed from the amount computed by applying the Company’s federal statutory income tax rate of

21.0%

and

34.0%

2018

and

2017,

respectively, as described in the

following table:

	2018			2017
	(Dollars in Thousands)
Income tax expense at federal statutory rate	$	712		$	892
Increase (decrease) resulting from:
Tax-exempt interest		(119	)		(219	)
Bank-owned life insurance		(66	)		(109	)
State income tax expense, net of federal income taxes		137			54
Tax Reform adjustment		—			2,471
Other		237			(54	)
Total	$	901		$	3,035

The tax effects of temporary differences that gave rise to significant portions of the

deferred tax assets and deferred tax liabilities as of

December

31,

2018

and

2017

are presented below:

	2018		2017
	(Dollars in Thousands)
Deferred tax assets:
Allowance for loan losses	$	1,228	$	1,197
Deferred compensation		1,064		1,045
Deferred commissions and fees		308		313
Impairment of other real estate owned		99		532
Federal net operating loss carryforwards		1,549		1,486
State net operating loss carryforwards		280		288
Federal alternative minimum tax and general business credits carryforwards		167		340
Unrealized loss on securities available-for-sale		797		400
Other		621		418
Total gross deferred tax assets		6,113		6,019
Deferred tax liabilities:
Premises and equipment		888		214
Core deposit intangible		463		—
Limited partnerships		122		81
Cash flow hedges		—		111
Other		31		24
Total gross deferred tax liabilities		1,504		430
Net deferred tax asset, included in other assets	$	4,609	$	5,589

As of

December 31, 2018

and

2017,

respectively, the Company had

$2.0

million and

$2.1

million related to federal and state net operating loss and tax credit carryforwards that can be used to offset income in future periods and reduce

income taxes payable in those future periods. The majority of these carry-forwards will

not

begin to expire until

2032.

The remaining net deferred tax assets, which totaled

$2.6

million and

$3.5

million as of

December 31, 2018

and

2017,

respectively, do

not

have an expiration date.

The

Company’s determination of the realization of net deferred tax assets at

December 31, 2018

and

2017

was based on management’s assessment of all available positive and negative evidence. As of both

December 31, 2018

and

December 31, 2017,

the Company was

not

in a

three

-year cumulative loss position. In addition, the Company has positive evidence supporting the realization of its net deferred tax assets as of

December 31, 2018,

including the reversal of taxable temporary differences, a strong history of earnings and tax planning strategies, including the conversion of tax-exempt investments to taxable investments to generate future taxable income to prevent tax attributes, such as net operating losses, from expiring unutilized. Accordingly, a valuation allowance was

not

established as of

December 31, 2018

December 31, 2017.

The Company files a consolidated income tax return with the federal government and the States of Alabama and Tennessee. ALC files several

state income tax returns, with the majority of its non-Alabama income being apportioned to Mississippi

. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and the states in which it filed for the years ended

December

31,

2013

through

2018.

As of

December 31, 2018,

the Company had

unrecognized tax benefits related to federal or state income tax matters and does

not

anticipate any material increase or decrease in unrecognized tax benefits relative to any tax positions taken prior to

December

31,

2018.

As of

December

31,

2018,

the Company had accrued

interest and

penalties related to uncertain tax positions.