Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax expense for 2021 and 2020 consisted of the following:

	2021		2020
	(Dollars in thousands)
Current tax expense:
Federal	$	9,906	$	9,648
State	2,952		2,658
	12,858		12,306
Deferred tax expense/(benefit)	1,079		(2,295)
Income tax expense	$	13,937	$	10,011

The components of the net deferred tax asset at December 31, 2021 and 2020 were as follows:

	2021		2020
	(Dollars in thousands)
Deferred tax assets:
Allowance for loan losses	$	7,398	$	7,255
Supplemental Executive Retirement Plan ("SERP")	1,512		1,583
OREO write-downs	—		158
Nonaccrued interest	79		612
Non-qualified stock options and restricted stock	167		117
Write-down on partnership investment	135		133
PPP Deferred Loan Fees	185		509
Other	61		84
	9,537		10,451
Valuation allowance	(135)		(133)
Total gross deferred tax assets	9,402		10,318
Deferred tax liabilities:
Depreciation	(107)		(158)
Partnership income	(35)		(28)
Unrealized gain	(85)		(161)
Deferred loan costs	(1,567)		(1,360)
Total gross deferred tax liabilities	(1,794)		(1,707)
Net deferred tax asset	$	7,608	$	8,611

A reconciliation of the Company’s effective income tax rate with the statutory federal rate for 2021 and 2020 is as follows:

	2021		2020
	(Dollars in thousands)
At Federal statutory rate	$	11,531	$	8,166
Adjustments resulting from:
State income taxes, net of Federal tax benefit	2,372		1,783
Non-controlling interest	(46)		(94)
Tax exempt income	(15)		(11)
BOLI	(121)		(124)
Stock compensation	(94)		(1)
Nondeductible expenses	8		1
Nondeductible compensation under 162m	87		125
Other	215		166
	$	13,937	$	10,011

Management has evaluated the Company’s tax positions and concluded that the Company has taken no uncertain tax positions that require adjustments to the financial statements. With few exceptions, the Company is no longer subject to income tax examinations by local tax authorities for years before 2018, and by the State of New Jersey for years before 2017. The Company’s 2016 federal tax return is currently under audit and has extended the statute of limitations until 2022. For 2018 and after, the Company is still subject to examination. The Company recorded a valuation allowance relating to the write down of a partnership investment. Management has concluded that these capital losses will not be realizable once incurred.

The Company recorded income tax expense of $13.9 million on income before taxes of $54.9 million on for the year ended December 31, 2021, resulting in an effective tax rate of 25.4%, compared to income tax expense of $10.0 million on income before taxes of $38.9 million for the same period of 2020, resulting in an effective tax rate of 25.7%.