Income Taxes

12 Months Ended

Dec. 31, 2020

Income Taxes [Abstract]

Income Taxes

(18) Income Taxes

The provision for income tax expense consisted of the following for the years ended December 31:

	2020			2019			2018
Current:
Federal	$	3,689		$	3,056		$	3,654
State		2,241			2,164			2,300
		5,930			5,220			5,954
Deferred:
Federal		(929	)		472			(711	)
State		(500	)		(22	)		(499	)
		(1,429	)		450			(1,210	)
	$	4,501		$	5,670		$	4,744

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2020 and 2019 consisted of:

	2020		2019
Deferred tax assets:
Allowance for loan losses	$	4,838	$	3,901
Deferred compensation		101		108
Retirement compensation		1,456		1,378
Stock option compensation		256		181
Postretirement benefits		871		576
Current state franchise taxes		467		457
Non-accrual interest		484		11
Sale-leaseback		51		75
Lease liability		1,900		2,212
Other		252		160
Deferred tax assets		10,676		9,059
Deferred tax liabilities:
Fixed assets depreciation		1,357		1,455
FHLB dividends		184		187
Tax credit – loss on pass-through		499		210
Deferred loan costs		823		780
Mortgage servicing rights		143		164
Investment securities unrealized gain		2,903		630
Right of Use Asset		1,748		2,058
Other		89		94
Total deferred tax liabilities		7,746		5,578
Net deferred tax assets (see Note 7)	$	2,930	$	3,481

Based upon the level of historical taxable income and projections for future taxable income over the periods during which the deferred tax assets are deductible, management believed it is more-likely-than-not the Company will realize the benefits of these deductible differences.

At December 31, 2020, the Company had no state net operating loss carry forwards and no federal tax credit carry forwards.

A reconciliation of income taxes computed at the federal statutory rate and the provision for income taxes for the years ended December 31 is as follows:

	2020			2019			2018
Federal statutory income tax rate		21.0	%		21.0	%		21.0	%
Increase (decrease) in tax rate due to:
State franchise tax, net of federal benefit		8.3	%		8.3	%		8.2	%
Reduction for tax exempt interest		(1.7	)%		(1.2	)%		(0.8	)%
Cash surrender value of life insurance		(0.6	)%		(0.5	)%		(0.5	)%
Other tax credits		0.0	%		(0.1	)%		(0.5	)%
Other		0.1	%		0.3	%		0.0	%
Effective income tax rate		27.1	%		27.8	%		27.4	%

Accounting for Uncertainty in Income Taxes

The Company had no unrecognized tax benefits for the years ended December 31, 2020 and 2019.  The Company recognized no changes in unrecognized tax benefits during 2020 and 2019 due to the expiration of a statute of limitations.  The Company had no significant uncertain tax positions as of December 31, 2020 and December 31, 2019.  The Company does not currently anticipate any significant increase or decrease in unrecognized tax benefits during 2021.

The Company classifies interest and penalties as a component of the provision for income taxes. At December 31, 2020, there were no unrecognized interest and penalties. The tax years ended December 31, 2019, 2018 and 2017 remain subject to examination by the Internal Revenue Service. The tax years ended December 31, 2019, 2018, 2017 and 2016 remain subject to examination by the California Franchise Tax Board. The deductibility of these tax positions will be determined through examination by the appropriate tax authorities or the expiration of the tax statute of limitations.

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company has evaluated the impact of the CARES Act and determined that none of the changes would result in a material income tax benefit to the Company.

On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law and extends several provisions of the CARES Act. As of December 31, 2020, the Company has determined that neither this Act nor changes to income tax laws or regulations in other jurisdictions have a significant impact on our effective tax rate.