INCOME TAXES

12 Months Ended

Dec. 31, 2020

INCOME TAXES

INCOME TAXES

NOTE 20: INCOME TAXES

The components of the provision for income tax expense for the periods listed below were as follows:

	For the Years Ended December 31,
(Dollars in thousands)	2020		2019		2018
Current federal income tax	$	9,419	$	12,988	$	11,908
Current state income tax		240		240		190
Deferred income tax		(3,625)		(1,657)		(734)
Total income tax expense	$	6,034	$	11,571	$	11,364

Income tax expense for the periods listed below differs from the applicable statutory rate of 21% for the years ended December 31, 2020, 2019 and 2018 as follows:

	For the Years Ended December 31,
(Dollars in thousands)	2020		2019		2018
Tax expense calculated at statutory rate	$	6,803	$	13,038	$	12,317
Increase (decrease) resulting from:
State income tax		190		190		150
Tax exempt interest income		(832)		(807)		(834)
Bank-owned life insurance		(506)		(1,047)		(381)
Other		379		197		112
Total income tax expense	$	6,034	$	11,571	$	11,364
Effective tax rate		18.63%		18.64%		19.37%

The differences between the federal statutory rate of 21% and the effective tax rates presented in the table above were largely attributable to permanent differences primarily related to tax exempt interest income and bank-owned life insurance related earnings.

Deferred income taxes are provided for differences between the financial statement carrying amount of existing assets and liabilities and their respective tax basis. The components of the net deferred tax asset for the periods shown below were as follows:

		December 31,
(Dollars in thousands)		2020		2019
Deferred tax assets:
	Allowance for credit losses	$	8,534	$	5,308
	Compensation related		2,427		3,068
	Deferred loan origination fees and loan costs		2,025		1,261
	Loan related		1,254		253
	Operating lease liabilities		3,454		3,298
	Other		29		8
	Total deferred tax assets		17,723		13,196
Deferred tax liabilities:
	Accumulated depreciation		(1,550)		(1,140)
	Operating lease right-to-use assets		(2,790)		(2,714)
	Compensation 481(a) adjustment		—		(238)
	Core deposit intangibles		(836)		(997)
	Unrealized gain on securities available for sale		(1,801)		(634)
	Other		(46)		(41)
	Total deferred tax liabilities		(7,023)		(5,764)
Net deferred tax asset		$	10,700	$	7,432

As of December 31, 2020, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations are from the year 2016 forward for the State of Texas and from the year 2017 forward for federal. When necessary, the Company would include interest expense assessed by taxing authorities in interest expense and penalties related to income taxes in other expense in its consolidated statements of income. The Company did not record any interest or penalties related to income tax for the years ended December 31, 2020, 2019 and 2018. For the years ended December 31, 2020 and 2019, management has determined there were no material uncertain tax positions.