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Income Taxes
12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes
Note 13.
Income Taxes
(in thousands)
Income tax expense consists of the following:
 
    
2020
    
2019
    
2018
 
Current payable (benefit)
                          
Federal
   $ 872      $ 806      $ (181
State
     382        89        36  
    
 
 
    
 
 
    
 
 
 
       1,254        895        (145
       
Deferred tax expense
     498        459        973  
    
 
 
    
 
 
    
 
 
 
       
Income tax expense
   $ 1,752      $ 1,354      $ 828  
    
 
 
    
 
 
    
 
 
 
The differences between income taxes calculated at the federal statutory rate and income tax expense were as follows:
 
    
2020
    
2019
    
2018
 
Federal taxes based on statutory rate
   $ 1,823      $ 1,524      $ 1,575  
State income taxes, net of federal benefit
     326        145        133  
Tax-exempt
investment interest
     (280      (309      (487
Income related to bank-owned life insurance
     (126      —          —    
Other, net
     9        (6      (394
    
 
 
    
 
 
    
 
 
 
       
Income tax expense
   $ 1,752      $ 1,354      $ 8,28  
    
 
 
    
 
 
    
 
 
 
 
At December 31, 2020 and December 31, 2019, net deferred tax assets
consist
of the following:
 
    
2020
    
2019
 
Deferred tax assets
                 
Allowance for loan losses
   $ 1,181      $ 937  
Deferred compensation liability
     2,485        2,488  
Net operating loss carryforward
     267        1,000  
Other real estate owned
     488        819  
Acquisition fair value adjustments
     76        130  
Unrealized loss on securities
available-for-sale
     —          262  
Other
     206        6  
    
 
 
    
 
 
 
Total
     4,703        5,642  
Deferred tax liabilities
                 
Premises and equipment
     1,622        1,603  
Unrealized gain on securities
available-for-sale
     1,376        —    
Core deposit intangible
     157        184  
Other
     —          171  
    
 
 
    
 
 
 
Total
     3,155        1,958  
    
 
 
    
 
 
 
Net deferred tax asset
   $ 1,548      $ 3,684  
    
 
 
    
 
 
 
The Company has evaluated the need for a valuation allowance related to the above deferred tax assets and, based on the weight of the available evidence, has determined that it is more likely than not that all deferred tax assets will be realized.
As of December 31, 2020, the Company has no unrecognized tax benefits related to federal and state income tax matters. As of December 31, 2020, the Company has not accrued for interest and penalties related to uncertain tax positions. It is the Company’s policy to recognize interest or penalties related to income tax matters in income tax expense.
The Company and the Bank file a consolidated United States federal income tax return. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2017 through 2019. The Company and Bank’s state income tax returns are open to audit under the statute of limitations for the years ended December 31, 2017 through 2019.
The Company acquired federal net operating losses as part of its Charter acquisition, with varying expiration periods. The federal net operating losses (“NOLs”) acquired were $2,302, including $241 created during 2019. The Company used $824 of the NOL during 2020. As part of the Tax Act, the federal NOLs created by Charter during 2019 have an indefinite carryforward period.