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INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The following presents the components of the Company’s income tax expense as of December 31 (dollars in thousands):
20222021
Current:
Federal$5,637 $6,228 
State and local936 1,110 
Total current tax expense6,573 7,338 
Deferred:
Federal536 (734)
State and local(55)66 
Valuation allowance76 — 
Total deferred tax expense (benefit)557 (668)
Income tax expense$7,130 $6,670 
The following is a reconciliation of income taxes reflected on the Consolidated Statements of Income for the years ended December 31, 2022 and 2021, with income tax expense computed by applying the United States federal income tax rate of 21% to income before income taxes (dollars in thousands):
20222021
Income tax expense computed at 21% statutory rate
$6,054 $5,729 
Differences:
Permanent differences101 169 
State taxes, net of federal expense1,005 1,018 
LIHTC investment tax credit(404)(386)
LIHTC investment proportional amortization378 539 
Valuation allowance76 — 
Other, net(80)(399)
Income tax expense$7,130 $6,670 
The following presents the principal components of the Company’s deferred tax items as of December 31 (dollars in thousands):
20222021
Deferred tax assets:
Net operating loss carryforwards$472 $395 
Allowance for loan losses4,165 3,385 
Acquired loans fair market value adjustments826 976 
Assets acquired at fair value— 226 
Loans accounted for under the fair value option146 — 
Deferred rent621 753 
Stock-based compensation1,705 1,800 
Provision on other real estate owned— 463 
Other intangible assets254 279 
Unrealized losses on securities495 — 
Accrued bonuses— 868 
Loan fees459 — 
Accrued expenses— 821 
Other1,574 382 
Total deferred tax assets10,717 10,348 
Deferred tax liabilities:  
Goodwill(1,087)(1,137)
Depreciation(1,864)(1,636)
Unrealized gain on securities— (73)
Loan fees— (155)
Acquired loans fair market value adjustments(215)— 
Other(189)(130)
Total deferred tax liabilities(3,355)(3,131)
Net operating loss valuation allowance (448)(372)
Net deferred tax asset$6,914 $6,845 
Management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the total deferred tax assets. The net operating loss ("NOL") carryforwards expire in tax years 2028 through 2032. As of December 31, 2022 and December 31, 2021, the Company had $5.5 million of California NOLs available for utilization. For taxable years 2020, 2021, and 2022, California has suspended the NOL carryover deduction. On February 9, 2022, Senate Bill 113 was signed to reinstate the NOL deduction for businesses and individuals that have $1 million or more of net income subject to tax in California for tax years beginning January 1, 2022. Both corporations and individual tax payers may continue to compute and carryover an NOL during the suspension period. Different rules apply depending on the amount of income per year. The suspension does not apply to corporate tax payers if their income subject to California taxation is less than $1 million. During 2020, as a result of this tax legislation and certain divestitures in California, the Company was uncertain as to the probability of realizing the full NOL. As such, the Company recorded a valuation allowance related to the California NOLs. As of December 31, 2022, $5.2 million is recorded as a valuation allowance, resulting in a tax effected valuation allowance of $0.4 million. The Company identified no other material uncertain tax positions for which it is reasonably possible the total amount of unrecognized tax benefits will significantly increase or decrease within 12 months.
The Company and its subsidiaries file tax returns for the United States and for multiple states and localities. The United States federal income tax returns of the Company are eligible to be examined for the years 2019 and forward. There are no federal or state tax examinations currently in progress.