NOTE 8 — Income Taxes

The following summarizes components of income tax expense for the years ended December 31:


	2019		2018		2017
Current
Federal expense	$	3,905	$	2,761	$	1,955
State and city expense		1,206		799		387
Total current tax expense		5,111		3,560		2,342

Deferred
Federal (benefit) expense		153		(257)		444
State and city (benefit) expense		(269)		(113)		604
Total deferred tax (benefit) expense		(116)		(370)		1,048
Income tax expense	$	4,995	$	3,190	$	3,390

The following is a reconciliation of the Company’s statutory federal income tax rate of 21% for 2019, 21% for 2018 and 35% for 2017 to its effective tax rate at December 31:


	2019		2018		2017
Federal tax expense at statutory rate	$	4,019	$	2,504	$	2,462
State and local income taxes, net of federal income tax benefit		1,157		608		200
Incentive stock options		48		33		117
Stock-based compensation excess tax benefit		(23)		(60)		(85)
Change to deferred tax as a result of tax reform		—		—		683
Research and development tax credits		(129)		—		—
Other		(77)		105		13
Income tax expense	$	4,995	$	3,190	$	3,390

The following summarizes the components of the Company’s deferred tax assets and deferred tax liabilities at December 31:


	2019		2018
Deferred tax assets:
Net operating loss carry forwards	$	321	$	237
Pre-opening costs		44		70
Stock based compensation		754		505
Allowance for loan loss		1,931		1,509
Unrealized loss on securities available-for-sale		—		985
Total deferred tax assets		3,050		3,306
Deferred tax liabilities:
Fixed assets		(414)		(64)
Deferred rent		(52)		(48)
Unrealized gain on securities available-for-sale		(154)		—
Investment in partnership		(352)		—
Deferred loan fees		(29)		(122)
Total deferred tax liabilities		(1,001)		(234)
Deferred tax asset, net	$	2,049	$	3,072

The Company has New York state and city net operating loss carryforwards of $4,474 and $336, respectively, as of December 31, 2019. The net operating losses are available to reduce future taxable income and begin to expire in 2026.

Realization of deferred tax assets is dependent upon the generation of future taxable income. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. Based on its evaluation, the Company has determined that it is more likely than not that the deferred tax asset as of December 31, 2019 and 2018, will be realized.

The Company does not have any unrecognized tax benefits at December 31, 2019 and 2018, and does not expect this to increase in the next twelve months. There were no interest and penalties recorded in the consolidated statement of income for the years ended December 31, 2019, 2018 and 2017. The Company is subject to U.S. federal income tax as well as income tax of the state of New York, New York City and Florida. The Company is no longer subject to examination by taxing authorities for years before 2016.