NOTE 19 – INCOME TAXES

The Company and its subsidiary are subject to U.S. federal and state income tax. The components of income tax expense for the years ended December 31, 2019 and 2018 are as follows:


(Dollars in thousands)	2019		2018
Current:
Federal	$	5,197	$	2,112
State		2,461		1,393
		7,658		3,505
Deferred:
Federal		187		(51)
State		(749)		(395)
		(562)		(446)
	$	7,096	$	3,059

The reconciliation of the statutory federal income tax at a rate of 21% and 21%, respectively, to the income tax expense included in the statements of income and comprehensive income for the years ended December 31, 2019 and 2018 is as follows:


(Dollars in thousands)	2019				2018
Federal income tax at statutory rate	$	6,224	21	%	$	2,726	21	%
Tax exempt interest		(223)	(1)			(371)	(3)
State income tax, net of federal income tax effect		1,352	5			788	6
Bank owned life insurance		(195)	(1)			(160)	(1)
M&A expenses		—	—			171	1
Other		(62)	—			(95)	—
	$	7,096	24	%	$	3,059	24	%

The components of the net deferred tax asset at December 31, 2019 and 2018 are as follows:


(Dollars in thousands)	2019		2018
Deferred tax assets:
Allowance for loan losses	$	2,654	$	2,069
Deferred compensation		500		462
Deferred fees		—		—
Foreclosed real estate		38		99
Restricted stock		300		258
Depreciation		303		—
Prepaid expenses		13		—
Purchase accounting		772		—
Unrealized loss on securities available for sale		—		401
Unrealized loss on interest rate swaps		1,007		—
Other		1,280		759
Total deferred tax assets		6,867		4,048
Deferred tax liabilities:
Depreciation		—		(26)
Prepaid expenses		—		(66)
Purchase accounting		—		(51)
Unrealized gain on retirement benefit plan		(3)		(3)
Unrealized gain on securities, available for sale		(328)		—
Unrealized gain on interest rate swaps		—		(358)
Total deferred tax asset (liabilities)		(331)		(504)
Net deferred tax asset, included in other assets	$	6,536	$	3,544