Income Taxes
 12 Months Ended
Dec. 31, 2016
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
Income tax expense for the years ended December 31, 2016, 2015 and 2014 consists of the following:
 
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
 
 
(In Thousands)
Current:
 
 
 
 
 
 
Federal
 
$
2,839

 
$
5,881

 
$
4,235

State
 
425

 
1,338

 
1,459

Current tax expense
 
3,264

 
7,219

 
5,694

Deferred:
 
 
 
 
 
 
Federal
 
(1,000
)
 
1,036

 
1,299

State
 
(108
)
 
122

 
90

Deferred tax (benefit) expense
 
(1,108
)
 
1,158

 
1,389

Total income tax expense
 
$
2,156

 
$
8,377

 
$
7,083


Deferred income tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax basis. Net deferred tax assets are included in accrued interest receivable and other assets in the Consolidated Balance Sheets.
The significant components of the Corporation’s deferred tax assets and liabilities were as follows:
 
 
 
December 31, 2016
 
December 31, 2015
 
 
(In Thousands)
Deferred tax assets:
 
 
 
 
Allowance for loan and lease losses
 
$
8,177

 
$
6,422

SBA recourse reserve
 
720

 
—

Excess book basis over tax basis for net assets acquired
 
336

 
697

Deferred compensation
 
951

 
1,305

State net operating loss carryforwards
 
548

 
666

Non-accrual loan interest
 
815

 
813

Capital loss carryforwards
 
32

 
33

Unrealized losses on securities
 
349

 
50

Other
 
394

 
342

Total deferred tax assets before valuation allowance
 
12,322

 
10,328

Valuation allowance
 
—

 
(68
)
Total deferred tax assets
 
12,322

 
10,260

Deferred tax liabilities:
 
 
 
 
Leasing and fixed asset activities
 
7,389

 
6,878

Loan servicing asset
 
780

 
612

Other
 
101

 
137

Total deferred tax liabilities
 
8,270

 
7,627

Net deferred tax asset
 
$
4,052

 
$
2,633


The tax effects of unrealized gains and losses on securities are components of other comprehensive income. A reconciliation of the change in net deferred tax assets to deferred tax expense as of December 31, 2016, 2015 and 2014 was as follows:
 
 
December 31, 2016
 
December 31, 2015
 
December 31, 2014
 
 
(In Thousands)
Change in net deferred tax assets
 
$
1,419

 
$
(970
)
 
$
(119
)
Deferred taxes allocated to other comprehensive income
 
(311
)
 
(188
)
 
352

Acquired deferred tax assets
 
—

 
—

 
(1,622
)
Deferred income tax benefit (expense)
 
$
1,108

 
$
(1,158
)
 
$
(1,389
)

Realization of the deferred tax asset over time is dependent upon the Corporation generating sufficient taxable earnings in future periods. In making the determination that the realization of the deferred tax was more likely than not, the Corporation considered several factors including its recent earnings history, its expected earnings in the future, appropriate tax planning strategies and expiration dates associated with operating loss carry forwards.
The Corporation had state net operating loss carryforwards of approximately $10.7 million and $12.9 million at December 31, 2016 and 2015, respectively, which can be used to offset future state taxable income. The Corporation believes it will be able to fully utilize its Wisconsin state net operating losses under this law and therefore no valuation allowance has been established as of December 31, 2016.
The provision for income taxes differs from that computed at the federal statutory corporate tax rate as follows: 
 
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
 
 
(Dollars in Thousands)
Income before income tax expense
 
$
17,065

 
$
24,891

 
$
21,222

Tax expense at statutory federal rate of 35%, 34.42% and 34% applied to income before income tax expense, respectively
 
$
5,973

 
$
8,568

 
$
7,305

State income tax, net of federal effect
 
206

 
968

 
1,000

Tax-exempt security and loan income, net of TEFRA adjustments
 
(1,114
)
 
(879
)
 
(736
)
Bank-owned life insurance
 
(341
)
 
(330
)
 
(296
)
Non-deductible transaction costs
 
—

 
—

 
124

Tax credits, net
 
(2,696
)
 
(246
)
 
(375
)
Other
 
128

 
296

 
61

Total income tax expense
 
$
2,156

 
$
8,377

 
$
7,083

Effective tax rate
 
12.63
%
 
33.65
%
 
33.38
%

As of December 31, 2016, there were no uncertain tax positions outstanding. The summary of all of the Corporation’s uncertain tax positions totaled $27,000 at December 31, 2015. There were no material additions to or reductions from these uncertain tax positions for the year ended December 31, 2016. As of December 31, 2016, tax years remaining open for the State of Wisconsin tax were 2012 through 2015. Federal tax years that remained open were 2013 through 2015. As of December 31, 2016, there were also no unrecognized tax benefits that are expected to significantly increase or decrease within the next twelve months.