NOTE 16. INCOME TAXES

The following table provides information on components of income tax expense for continuing operations for each of the two years ended December 31.


(Dollars in thousands)	2019		2018
Current tax expense:
Federal	$	3,974	$	4,110
State		1,395		1,167
		5,369		5,277
Deferred income tax (benefit) expense:
Federal		122		(120)
State		119		223
		241		103

Total income tax expense	$	5,610	$	5,380

The U.S. Tax Cuts and Jobs Act (“Tax Act”) was enacted on December 22, 2017 and introduced significant changes to U.S. income tax law. Among other things, the Tax Act reduced the U.S. statutory tax rate from 35% to 21% beginning in 2018.

The following table provides a reconciliation of tax computed at the statutory federal tax rate to the actual tax expense for continuing operations for each of the two years ended December 31.


	2019		2018
Tax at federal statutory rate	21	%	21	%
Tax effect of:
Tax-exempt income	(1.0)		(0.5)
State income taxes, net of federal benefit	5.5		5.2
Other	0.1		(0.3)
Actual income tax expense rate	25.6	%	25.4	%

The following table provides information on significant components of the Company’s deferred tax assets and liabilities as of December 31.


(Dollars in thousands)	2019		2018
Deferred tax assets:
Allowance for credit losses	$	2,850	$	2,797
Write-downs of other real estate owned		9		273
Nonaccrual loan interest		353		260
Unrealized losses on available-for-sale securities		—		1,105
Unrealized losses on available-for-sale securities transferred to held to maturity		4		12
Other		735		605
Total deferred tax assets		3,951		5,052
Less valuation allowance		(63)		—
Deferred tax assets net of valuation allowance		3,888		5,052
Deferred tax liabilities:
Depreciation		198		238
Acquisition accounting adjustments		508		247
Deferred capital gain on branch sale		194		200
Unrealized gains on available-for-sale securities		74		—
Other		160		185
Total deferred tax liabilities		1,134		870
Net deferred tax assets	$	2,754	$	4,182