Income Taxes

12 Months Ended

Dec. 31, 2019

Income tax expense in the consolidated statements of income for the years ended December 31, 2019 and 2018, includes the following (in thousands):


	2019		2018
Current tax expense
Federal	$	5,143	$	661
State	974		141
Deferred tax expense related to:
Federal	678		1,992
State	102		439
Total income tax expense	$	6,897	$	3,233

The income tax expense is different from the expected tax expense computed by multiplying income before income tax expense by the statutory income tax rate of 21 percent. The reasons for this difference are as follows (in thousands):


	2019		2018
Federal income tax expense computed at the statutory rate	$	7,024	$	4,481
State income taxes, net of federal tax benefit	872		551
Nondeductible acquisition expenses	—		138
Tax-exempt interest	(469)		(121)
Tax benefit from stock options	(24)		(1,786)
Other	(506)		(30)
Total income tax expense	$	6,897	$	3,233

During 2018, the Company recorded a tax benefit from stock options exercised during 2017. This reduced our tax provision by $1.6 million for the year ended December 31, 2018.

Note 9. Income Taxes, Continued

The components of the net deferred tax asset as of December 31, 2019 and 2018, were as follows (in thousands):


	2019		2018
Deferred tax assets:
Allowance for loan losses	$	2,688	$	2,172
Fair value adjustments	4,098		6,086
Unrealized losses on securities	—		659
Unrealized losses on hedges or derivative securities	79		280
OREO	25		271
Deferred compensation	976		833
Lease liability	1,438		—
Federal net operating loss carryforward	221		350
Other	442		440
Total deferred tax assets	9,967		11,091
Deferred tax liabilities:
Accumulated depreciation	1,610		1,875
Core deposit intangible	2,971		3,332
Right of use asset	1,435		—
Unrealized gains on investment securities	139		—
Other	332		286
Total deferred tax liabilities	6,487		5,493
Net deferred tax asset	$	3,480	$	5,598

The Company has a Federal net operating loss carryforward of $1.1 million acquired with the acquisition of Foothills Bancorp. This federal net operating loss does not expire. The income tax returns of the Company for 2018, 2017, and 2016 are subject to examination by the federal and state taxing authorities, generally for three years after they were filed.