Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

13.     INCOME TAXES

The provision for income taxes follows (dollars in thousands):

	Year Ended December 31,
	2023		2022		2021
Federal:
Current	$	8,470	$	6,071	$	8,186
Deferred		(1,531)		233		135
Total federal		6,939		6,304		8,321
State:
Current		5,493		4,874		5,916
Deferred		(812)		78		(50)
Total state		4,681		4,952		5,866
Total tax provision	$	11,620	$	11,256	$	14,187

The components of the net deferred tax asset, included in other assets, are as follows (dollars in thousands):

	December 31,
	2023		2022
Deferred tax assets:
Allowance for credit losses on loans	$	6,947	$	6,817
Deferred compensation		4,440		4,158
Accrued reserves		1,131		1,022
Non-accrual loans		76		241
Lease liability		6,488		2,147
Loan fair value adjustment		172		245
Net operating losses		1,178		1,370
State income tax deduction		1,176		1,005
Other		4,982		1,211
Unrealized losses on securities available-for-sale		15,101		23,746
Total deferred tax assets		41,691		41,962
Deferred tax liabilities:
Deferred loan costs		(1,304)		(1,070)
Right-of-use asset		(7,604)		(2,034)
TRUPS accretion		(735)		(788)
FMV equity securities		(620)		(706)
Prepaids		(791)		(639)
Other		(689)		(517)
Intangibles		(130)		(337)
Premises and equipment		(1,136)		(887)
Total deferred tax liabilities		(13,009)		(6,978)
Net deferred tax assets	$	28,682	$	34,984

The Company believes that the deferred tax assets will be fully realized, therefore no valuation allowance has been recorded.

The expense for income taxes differs from amounts computed by applying the statutory Federal income tax rates to income before income taxes. The significant items comprising these differences consisted of the following (dollars in thousands):

	Year Ended December 31,
	2023		2022		2021
Income tax expense at federal statutory rate	$	9,758	$	9,432	$	12,012
Increase (decrease) resulting from:
State franchise tax expense, net of federal tax effect		3,698		3,912		4,634
Tax exempt municipal income		(2,291)		(1,849)		(1,306)
Affordable housing tax credits		16		(530)		(524)
Excess tax benefit of stock-based compensation		22		(50)		(109)
Cash surrender value - life insurance		(371)		209		(556)
Other		788		132		36
Total	$	11,620	$	11,256	$	14,187
Effective tax rate		25.01%		25.06%		24.80%

The Company is subject to federal income tax and income tax of various states. Our federal income tax returns for the years ended December 31, 2020, 2021 and 2022 are open to audit by the federal authorities and our California state tax returns for the years ended December 31, 2019, 2020, 2021 and 2022 are open to audit by the state authorities.

At December 31, 2023, the Company has net federal net operating loss carry forwards of approximately $3.4 million which expire at various dates from 2031 to 2034. The Company also had California Franchise tax net operating loss carry forwards of approximately $5.4 million which expire at various dates from 2032 to 2036. Net operating loss carry forwards available from acquisitions are substantially limited by Section 382 of the Internal Revenue Code and benefits not expected to be realized due to the limitation have been excluded from the deferred tax asset and net operating loss carry forward amounts noted above.

There were no recorded interest or penalties related to uncertain tax positions as part of income tax for the years ended December 31, 2023, 2022, and 2021, respectively. We do not expect the total amount of unrecognized tax benefits to significantly increase or decrease within the next twelve months.