INCOME TAXES
 12 Months Ended
Dec. 31, 2016
Income Tax Disclosure [Abstract]  
INCOME TAXES
NOTE 15. INCOME TAXES

 

The current and deferred amounts of income tax expense were as follows:

 

(in thousands)   2016     2015     2014  
Current   $ 6,033     $ 5,486     $ 4,675  
Deferred     3,338       603       (68 )
Income tax expense   $ 9,371     $ 6,089     $ 4,607  

 

The differences between the income tax expense recognized and the amount computed by applying the statutory federal income tax rate to the income before income taxes, less noncontrolling interest, for the years ended December 31, 2016, 2015 and 2014 are included in the following table.

 

(in thousands)   2016     2015     2014  
Tax on pretax income, less noncontrolling interest, at statutory rates   $ 9,742     $ 5,956     $ 4,949  
State income taxes, net of federal effect     1,339       980       594  
Tax-exempt interest income     (769 )     (430 )     (317 )
Non-deductible interest disallowance     18       15       18  
Increase in cash surrender value life insurance     (452 )     (338 )     (289 )
Non-deductible business entertainment     106       94       81  
Non-deductible merger expenses     18       106       -  
Stock-based employee compensation     (35 )     20       62  
Other, net     (596 )     (314 )     (491 )
Income tax expense   $ 9,371     $ 6,089     $ 4,607  

 

The net deferred tax asset includes the following amounts of deferred tax assets and liabilities at December 31:

 

(in thousands)   2016     2015  
Deferred tax assets:                
ALLL   $ 13,975     $ 6,360  
Net operating loss carryforwards     3,058       2,603  
Credit carryforwards     981       13  
Other real estate     1,350       112  
Compensation     3,727       804  
Other     949       190  
Unrealized loss on securities AFS     1,743       -  
Total deferred tax asset     25,783       10,082  
Deferred tax liabilities:                
Premises and equipment     (681 )     (830 )
Prepaid expenses     (808 )     (327 )
Investment securities     (2,856 )     (148 )
Core deposit and other intangibles     (6,125 )     (378 )
Estimated section 382 limitation     (561 )     (980 )
Purchase accounting adjustments to liabilities     (3,192 )     (1,561 )
Other     (621 )     -  
Unrealized gain on securities AFS     -       (626 )
Total deferred tax liability     (14,844 )     (4,850 )
Net deferred tax asset   $ 10,939     $ 5,232  

 

A valuation allowance is required if it is more likely than not that some portion of the deferred tax asset will not be realized. At December 31, 2016 and 2015, no valuation allowance was determined to be necessary. 
  
At December 31, 2016, the Company had a federal and state net operating loss carryforward of $5.3 million and $23.4 million, respectively. Of these amounts, the entire $5.3 million of federal net operating loss carryover and $21.0 million of the state net operating loss carryover were the result of the Company’s mergers with Mid-Wisconsin and Baylake. Both the federal and state net operating loss carryovers resulting from the mergers have been included in the IRC section 382 limitation calculation and are being limited to the overall amount expected to be realized. The full $2.4 million state net operating loss carried over from the Company’s regular operations is expected to be utilized over the next 17 years and will not expire. The Company’s federal income tax returns are open and subject to examination from the 2013 tax return year and forward. The years open to examination by state and local government authorities varies by jurisdiction.