Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 12. Income Taxes

Income tax expense in the consolidated statements of income for the years ended December 31, 2021 and 2020, includes the following (in thousands):

	2021		2020
Current tax expense
Federal	$	8,031	$	6,330
State		855		1,447
Deferred tax expense related to:
Federal		405		(991)
State		238		(228)
Total income tax expense	$	9,529	$	6,558

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%. The reasons for this difference are as follows (in thousands):

	2021		2020
Federal income tax expense computed at the statutory rate	$	9,307	$	6,487
State income taxes, net of federal tax benefit		863		923
Nondeductible acquisition expenses		94		109
Tax-exempt interest		(568)		(555)
Tax benefit from stock options		(10)		(14)
Other		(157)		(392)
Total income tax expense	$	9,529	$	6,558

The components of the net deferred tax asset as of December 31, 2021 and 2020, were as follows (in thousands):

	2021		2020
Deferred tax assets:
Allowance for loan losses	$	5,011	$	4,744
Fair value adjustments		4,119		3,854
Unrealized losses on hedges or derivative securities		—		278
Other real estate owned		306		523
Deferred compensation		1,564		1,103
Lease liability		2,559		1,248
Federal net operating loss carryforward		4,645		—
Other		1,977		82
Total deferred tax assets		20,181		11,832
Deferred tax liabilities:
Accumulated depreciation		2,317		1,374
Core deposit intangible		3,047		3,112
Right of use asset		2,541		1,240
Unrealized gains on available-for-sale securities		240		1,051
Unrealized gains on hedges or derivative securities		262		—
Other		540		663
Total deferred tax liabilities		8,947		7,440
Net deferred tax asset	$	11,234	$	4,392

At December 31, 2021, the Company has a federal net operating loss carryforward recorded of approximately $22.1 million acquired with the acquisition of SCB.  The net operating loss is subject to Section 382 limitations.  The federal net operating loss will begin to expire in 2029.  During 2020, the CARES Act was passed allowing the five year carryback of net operating losses (“NOLs”).  The Federal NOLs acquired with Foothills Bancorp, Inc. and Tennessee Bancshares, Inc. were carried back for a refund in 2020.  The income tax returns of the Company for 2020, 2019, and 2018 are subject to examination by the federal and state taxing authorities, generally for three years after they were filed.