Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Tax Effects of Temporary Differences on the Deferred Tax Assets and Deferred Tax Liabilities

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2019 and 2018 are as follows (dollars in thousands):


	2019		2018
Deferred tax assets:
Allowance for loan losses	$	1,852	$	1,974
Deferred compensation		762		675
Unrealized loss on available for sale securities		—		174
Pension adjustment		249		242
Purchase accounting adjustment(1)		2,625		3,113
OREO		59		59
Leased assets		1,481		—
Other		185		168
		7,213		6,405
Deferred tax liabilities:
Accrued pension		226		256
Unrealized gain on available for sale securities		813		—
Depreciation premises and equipment		399		408
Lease liabilities		1,422		—
Other		12		67
		2,872		731
Net deferred tax asset	$	4,341	$	5,674

(1)

Purchase accounting adjustment includes timing differences related to PCI loans, purchased fixed assets, and differences in income recognition on the purchase transactions.

Allocation of the Income Tax Expense between Current and Deferred Portions

Allocation of the income tax expense between current and deferred portions is as follows (dollars in thousands):


	2019		2018
Current tax provision	$	3,132	$	2,313
Deferred tax expense		420		772
Income tax expense	$	3,552	$	3,085

Reconciliation of the Expected Income Tax Expense with the Reported Expense

The following is a reconciliation of the expected income tax expense (benefit) with the reported expense for each year:


	2019		2018
Statutory federal income tax rate	21	%	21	%
(Reduction) increase in taxes resulting from:
Municipal interest	(1.5)		(2.5)
Bank owned life insurance income	(0.8)		(0.9)
Stock compensation	(0.4)		0.7
Other, net	0.1		0.1
Effective tax rate	18.4	%	18.4	%