INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2017

Summary of Expense for Income Taxes Included in Consolidated Statement of Operations

The income tax expense included in the consolidated statements of income is displayed in the table below for the years ended December 31, 2017, 2016 and 2015 (dollars in thousands).



	December 31,
	2017		2016			2015
Current	$	4,003	$	3,816		$	3,897
Deferred	245		(207		)	(386		)
Total income tax expense	$	4,248	$	3,609		$	3,511

Summary of Provision for Federal Income Taxes Differs from that Computed by Applying the Federal Statutory Rate

The provision for federal income taxes differs from that computed by applying the federal statutory rate of 35% in 2017, 2016 and 2015, as indicated in the following analysis for the years ended December 31, 2017, 2016 and 2015 (dollars in thousands).



	December 31,
	2017			2016			2015
Tax based on statutory rate	$	4,258		$	3,921		$	3,704
Increase (decrease) resulting from:
Effect of tax-exempt income	(422		)	(273		)	(142		)
Acquisition costs	174			—			—
Historical tax credits	10			10			(62		)
Effect of tax rate change	292			—			—
Other	(64		)	(49		)	11
Total income tax expense	$	4,248		$	3,609		$	3,511
Effective rate	34.1		%	31.4		%	33.2		%

Summary of Deferred Tax Assets and Liabilities

The net deferred tax asset was comprised of the following items as of the dates indicated (dollars in thousands).



	December 31,
	2017			2016			2015
Deferred tax liabilities:
Depreciation	$	(1,652	)	$	(1,650	)	$	(1,402	)
FHLB stock dividend	(28		)	(20		)	(5		)
Basis difference in acquired assets and liabilities	(900		)	(276		)	(291		)
Basis difference in MFS, LLC	(20		)	—			—
Gross deferred tax liability	(2,600		)	(1,946		)	(1,698		)

Deferred tax assets:
Allowance for loan losses	1,549			2,150			1,588
Provision for other real estate losses	155			266			328
Unrealized loss on available for sale securities	418			1,115			357
Net operating loss carryforward	154			299			412
Deferred compensation	302			25			34
Basis difference in acquired assets and liabilities	839			253			265
Historical tax credit	144			243			247
Other	333			463			382
Gross deferred tax assets	3,894			4,814			3,613
Net deferred tax asset	$	1,294		$	2,868		$	1,915