Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Note 9. Income Taxes

Income tax expense was as follows:

	Year Ended December 31, 2020			Year Ended December 31, 2019			Year Ended December 31, 2018
	(Dollars in thousands)
Current federal expense	$	4,837		$	3,162		$	3,458
Current state expense		2,596			1,983			1,983
		7,433			5,145			5,441
Deferred federal expense		(1,516	)		228			(131	)
Deferred state expense		(810	)		(54	)		(106	)
		(2,326	)		174			(237	)
Total tax expense	$	5,107		$	5,319		$	5,204

Effective tax rates differ from the federal statutory rates of 21% for 2020, 2019, and 2018 applied to income before taxes due to the following:

	Year Ended December 31, 2020			Year Ended December 31, 2019			Year Ended December 31, 2018
	(Dollars in thousands)
Federal statutory rate times financial statement    income	$	3,840		$	4,636		$	4,086
Effect of:
Meals and entertainment		34			39			39
State income taxes, net of federal tax benefit		1,509			1,608			1,494
Stock option expense and related excess tax    benefits		(134	)		(419	)		(400	)
Company owned life insurance		(55	)		(314	)		(64	)
Other, net		(87	)		(231	)		49
		1,267			683			1,118
Total tax expense	$	5,107		$	5,319		$	5,204

The net deferred tax asset included in the statement of financial position includes the following components at the dates indicated below:

	December 31, 2020			December 31, 2019
	(Dollars in thousands)
Deferred tax assets:
Pre-opening expense	$	—		$	7
Organizational costs		25			27
Allowance for loan losses		4,717			2,971
Loans held for sale		695			52
Stock-based compensation		515			464
Accrued compensation		181			138
Lease liability		2,492			2,994
State taxes		586			456
Nonaccrual loan interest income		7			27
Other		23			24
Total deferred tax assets		9,241			7,160
Deferred tax liabilities:
Loan origination costs		(1,110	)		(752	)
Depreciation		(487	)		(663	)
Right of use asset		(2,006	)		(2,441	)
Net unrealized gain on securities available for sale		(352	)		(79	)
Other		(44	)		(36	)
Total deferred tax liabilities		(3,999	)		(3,971	)
Net deferred tax asset	$	5,242		$	3,189

A valuation allowance for deferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and tax planning strategies which will create taxable income during the periods in which those temporary differences become deductible.  At December 31, 2020, management reevaluated all positive and negative evidence that existed and concluded all deferred tax assets are realizable.  Therefore, no valuation allowance is necessary.

The Company is subject to U.S. Federal income tax as well as various state taxing jurisdictions.  The Company is no longer subject to examination by Federal taxing authorities for tax years prior to 2017 and for state taxing authorities for tax years prior to 2016.

There were no significant unrealized tax benefits recorded as of December 31, 2020, 2019 and 2018, and the Company does not expect any significant increase in unrealized tax benefits in the next twelve months.