INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The following table presents the components of the Company’s income tax expense as of December 31 (dollars in thousands):

	2023		2022
Current:
Federal	$	60	$	5,637
State and local	(281)		936
Total current tax (benefit)/expense	(221)		6,573
Deferred:
Federal	1,844		536
State and local	213		(55)
Valuation allowance	—		76
Total deferred tax expense	2,057		557
Income tax expense	$	1,836	$	7,130

The following is a reconciliation of income taxes reflected on the Consolidated Statements of Income for the years ended December 31, 2023 and 2022, with income tax expense computed by applying the United States federal income tax rate of 21% to income before income taxes (dollars in thousands):

	2023		2022
Income tax expense computed at 21% statutory rate	$	1,483	$	6,054
Differences:
Permanent differences	(106)		101
State taxes, net of federal expense	224		1,005
LIHTC investment tax credit	(441)		(404)
LIHTC investment proportional amortization	484		378
Valuation allowance	—		76
Other, net	192		(80)
Income tax expense	$	1,836	$	7,130

The following table presents the principal components of the Company’s deferred tax items as of December 31 (dollars in thousands):

	2023		2022
Deferred tax assets:
Net operating loss carryforwards	$	472	$	472
Allowance for credit losses(1)	6,194		4,165
Acquired loans fair market value adjustments	607		826
Loans accounted for under the fair value option	216		146
Deferred Rent - Liability	2,579		2,706
Stock-based compensation	1,423		1,705
Other intangible assets	186		254
Unrealized losses on securities	383		495
Accrued bonuses	376		—
Loan fees	74		459
Accrued expenses	77		—
Other	184		1,574
Total deferred tax assets	12,771		12,802
Deferred tax liabilities:
Goodwill	(1,263)		(1,087)
Depreciation	(2,311)		(1,864)
Deferred Rent - Asset	(2,113)		(2,085)
Acquired loans fair market value adjustments	(196)		(215)
FHLB Redemption	(33)		(189)
Total deferred tax liabilities	(5,916)		(5,440)
Net operating loss valuation allowance	(448)		(448)
Net deferred tax asset	$	6,407	$	6,914

(1) Provision for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.

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, 2023 and December 31, 2022, the Company had $5.5 million of California NOLs available for utilization. As of December 31, 2023, $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 2020 and forward and for the years 2019 and forward for major state taxing jurisdictions. There are no federal or state tax examinations currently in progress.