NOTE 20 Income Taxes

The components of income tax expense (benefit) for the years ended December 31, 2019, 2018, and 2017 are as follows:


	Year ended
	December 31,
(dollars in thousands)	2019		2018		2017
Federal
Current	$	7,091	$	5,801	$	6,646
Deferred		267		(49)		2,975
Federal income tax		7,358		5,752		9,621
State
Current		1,926		1,265		949
Deferred		72		155		734
State income tax		1,998		1,420		1,683
Deferred tax impairment and statutory rate change		—		—		6,210
Total income tax expense	$	9,356	$	7,172	$	17,514

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2019 and 2018 are as follows:


	December 31,		December 31,
(dollars in thousands)	2019		2018
Deferred Tax Assets
Allowance for loan losses	$	5,893	$	5,566
Employee compensation and benefit accruals		2,542		2,167
Expense accruals		935		740
Identifiable intangible amortization		3,369		3,351
Deferred loan fees		266		462
Net operating loss carry forwards		236		266
Nonaccrual loan interest		—		143
Unrealized gain on available‑for‑sale investment securities		—		1,207
Other		341		533
Total deferred tax assets from temporary differences		13,582		14,435
Deferred Tax Liabilities
Accumulated depreciation		1,431		1,079
Goodwill and intangible amortization		1,835		1,443
Servicing assets		965		1,137
Prepaid expenses		804		644
Unrealized loss on available‑for‑sale investment securities		649		—
Other		7		47
Total deferred tax liabilities from temporary differences		5,691		4,350
Net Deferred Tax Assets	$	7,891	$	10,085

The reconciliation between applicable income taxes and the amount computed at the applicable statutory Federal tax rate for years ending December 31, 2019, 2018, and 2017 is as follows:


	Year ended December 31,
	2019				2018				2017
			Percent of				Percent of				Percent of
(dollars in thousands)	Amount		Pretax Income		Amount		Pretax Income		Amount		Pretax Income
Taxes at statutory federal income tax rate	$	8,168	21.0	%	$	6,938	21.0	%	$	11,380	35.0	%
Tax effect of:
Tax exempt interest income		(442)	(1.1)			(365)	(1.1)			(562)	(1.7)
State income taxes, net of federal benefits		1,618	4.2			1,399	4.2			1,414	4.3
Change in federal statutory tax rate		—	—			—	—			4,818	14.1
Deferred tax impairment		—	—			—	—			1,392	4.3
Nondeductible items and other		12	—			(800)	(2.4)			(928)	(2.9)
Applicable income taxes	$	9,356	24.1	%	$	7,172	21.7	%	$	17,514	53.1	%

On December 22, 2017, the U.S. Government enacted Public Law 115-97, also known as the Tax Cuts and Jobs Act. This resulted in the corporate income tax rate being reduced from the 35% level to 21%. The Company adjusted the carrying value of the deferred tax assets using the new tax rate, which resulted in a charge to earnings in the fourth quarter of 2017. Impairment expense of $4.8 million was recorded. The Company was unable to recognize certain tax benefits related to loans acquired in 2014 and recorded an impairment expense of $1.4 million in 2017.

It is the opinion of management that the Company has no significant uncertain tax positions that would be subject to change upon examination.