Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The following table presents the components of income taxes expense (benefit) for the years ended December 31, 2022, 2021 and 2020:

	Year Ended December 31,
($ in thousands)	2022		2021		2020
Current income tax expense:
Federal	$	7,959	$	9,243	$	4,837
State	4,374		4,885		2,596
Total current income tax expense	12,333		14,128		7,433
Deferred income tax (benefit) expense:
Federal	783		(1,614)		(1,516)
State	298		(698)		(810)
Total deferred income tax (benefit) expense	1,081		(2,312)		(2,326)
Total income tax expense	$	13,414	$	11,816	$	5,107

The following table presents a reconciliation of the applicable statutory U.S. federal income tax rate to the effective tax rate for the periods indicated:

	Year Ended December 31,
	2022		2021		2020
Federal statutory income tax rate	21.0	%	21.0	%	21.0	%
Increase (decrease) in tax rate resulting from:
Meals and entertainment	—		—		0.2
State income taxes, net of federal tax benefit	8.4		8.5		8.3
Stock option expense and related excess tax benefits	—		0.1		(0.7)
Company owned life insurance	(0.2)		(0.1)		(0.3)
Other, net	(0.5)		(0.4)		(0.5)
Effective tax rate	28.7	%	29.1	%	28.0	%

The significant components of deferred tax assets and liabilities are reflected in the following table:

	December 31,
($ in thousands)	2022		2021
Deferred tax assets:
Organizational costs	$	20	$	22
Allowance for loan losses	5,688		4,827
Loans held for sale	852		2,919
Stock-based compensation	386		211
Accrued compensation	272		238
Lease liability	3,019		3,047
State taxes	989		1,059
Net unrealized loss on AFS debt securities	7,491		503
Nonaccrual loan interest income	46		62
Other	77		49
Total deferred tax assets	18,840		12,937
Deferred tax liabilities:
Loan origination costs	(1,407)		(1,477)
Depreciation	(423)		(379)
Right of use asset	(2,689)		(2,633)
Other	(5)		(39)
Total deferred tax liabilities	(4,524)		(4,528)
Net deferred tax asset	$	14,316	$	8,409

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. Management reevaluated all positive and negative evidence that existed and concluded all deferred tax assets are realizable. Therefore, no valuation allowance was necessary as of December 31, 2022 and 2021.

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 2019 and for state taxing authorities for tax years prior to 2018.

There were no significant unrealized tax benefits recorded as of December 31, 2022 and 2021, and the Company does not expect any significant increase in unrealized tax benefits in the next twelve months.