INCOME TAXES

12 Months Ended

Dec. 31, 2021

INCOME TAXES

INCOME TAXES

NOTE 20: INCOME TAXES

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

	For the Years Ended December 31,
(Dollars in thousands)	2021		2020		2019
Current federal income tax	$	8,129	$	9,419	$	12,988
Current state income tax		75		240		240
Deferred income tax		1,716		(3,625)		(1,657)
Total income tax expense	$	9,920	$	6,034	$	11,571

Income tax expense for the periods indicated below differ from the applicable statutory rate of 21% as follows:

	For the Years Ended December 31,
(Dollars in thousands)	2021		2020		2019
Tax expense calculated at statutory rate	$	9,559	$	6,803	$	13,038
Increase (decrease) resulting from:
State income tax		60		190		190
Tax exempt interest income		(1,111)		(832)		(807)
Bank-owned life insurance		(731)		(506)		(1,047)
Regulatory fines		1,680		—		—
Other		463		379		197
Total income tax expense	$	9,920	$	6,034	$	11,571
Effective tax rate		21.79%		18.63%		18.64%

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. The tax rate for the year ended December 31, 2021 was also impacted by the civil money penalties paid to FinCEN and the OCC which are not deductible.

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 indicated below were as follows:

		December 31,
(Dollars in thousands)		2021		2020
Deferred tax assets:
	Allowance for credit losses	$	7,268	$	9,412
	Compensation related		2,689		2,427
	Deferred loan origination fees and loan costs		1,772		2,025
	Loan related		339		376
	Operating lease liabilities		2,970		3,454
	Other		66		29
	Total deferred tax assets		15,104		17,723
Deferred tax liabilities:
	Accumulated depreciation		(1,205)		(1,550)
	Operating lease right-to-use assets		(2,350)		(2,790)
	Core deposit intangibles		(694)		(836)
	Unrealized gain on securities available for sale		(813)		(1,801)
	Other		(69)		(46)
	Total deferred tax liabilities		(5,131)		(7,023)
Net deferred tax asset		$	9,973	$	10,700

As of December 31, 2021, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations are from the year 2017 forward for the State of Texas and from the year 2018 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, 2021, 2020 and 2019. For the years ended December 31, 2021 and 2020, management has determined there were no material uncertain tax positions.