11.	INCOME TAXES

December 22, 2017,

the Tax Cuts and Jobs Act of

2017

(

“

Tax Reform

”

) was enacted. This legislation makes significant change in federal tax law, including a reduction in the corporate 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 tax rate to

21%

beginning in

2018.

As a result of the law, the Company was required to re-value deferred tax assets and liabilities at the

21%

rate as of

December 31, 2017.

This re-valuation resulted in a

one

-time, non-cash charge to income tax expense of

$2.5

million

and a corresponding reduction in the net deferred tax asset. The other provisions of Tax Reform did

not

have a material impact on the

2017

consolidated financial statements.

The consolidated provisions for income taxes for the years ended

December

31,

2017

and

2016

were as follows:

	2017		2016
	(Dollars in Thousands)
Federal
Current	$	65	$	30
Deferred		3,105		103
		3,170		133
State
Current		143		19
Deferred		(278)		17
		(135)		36
Total	$	3,035	$	169

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

2017

and

2016

34.0%

as described in the

following table:

	2017			2016
	(Dollars in Thousands)
Income tax expense at federal statutory rate	$	892		$	475
Increase (decrease) resulting from:
Tax-exempt interest		(219	)		(217	)
Bank-owned life insurance		(109	)		(106	)
State income tax expense, net of federal income taxes		54			29
Tax Reform adjustment		2,471			—
Other		(54	)		(12	)
Total	$	3,035		$	169

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,

2017

and

2016

are presented below:

	2017		2016
	(Dollars in Thousands)
Deferred tax assets:
Allowance for loan losses	$	1,197	$	1,792
Deferred compensation		1,045		1,603
Deferred commissions and fees		313		268
Impairment of other real estate owned		532		742
Federal net operating loss carryforwards		1,486		3,121
State net operating loss carryforwards		288		184
Federal alternative minimum tax and general business credits carryforwards		340		279
Unrealized loss on securities available-for-sale		400		872
Other		418		500
Total gross deferred tax assets		6,019		9,361
Deferred tax liabilities:
Premises and equipment		214		327
Limited partnerships		81		132
Cash flow hedges		111		127
Other		24		41
Total gross deferred tax liabilities		430		627
Net deferred tax asset, included in other assets	$	5,589	$	8,734

As of

December 31, 2017

and

2016,

the Company had

$2.1

million and

$3.6

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

$3.5

million and

$5.2

million as of

December 31, 2017

and

2016,

respectively, do

not

have an expiration date.

The Company

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

December 31, 2017

and

2016

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

December 31, 2017

and

December 31, 2016,

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, 2017,

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, 2017

December 31, 2016.

The Company files a consolidated income tax return with the federal government and the State of Alabama. 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 files for the years ended

December

31,

2013

through

2017.

As of

December

31,

2017,

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,

2017.

As of

December

31,

2017,

the Company had accrued

interest and

penalties related to uncertain tax positions.