INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2020

Components of Income Tax Expense Attributable to Income from Operations

For the years ended December 31, 2020, 2019 and 2018, income tax expense attributable to income from operations consisted of the following (in thousands):


	2020		2019		2018
Current expense:
Federal	$	4,413	$	4,603	$	1,732
State	280		395		124
Total current	4,693		4,998		1,856
Deferred expense/(benefit):
Federal	(136)		(1,126)		2,253
State	50		(438)		345
Remeasurement of deferred tax assets	—		—		(445)
Total deferred	(86)		(1,564)		2,153
Income tax expense	$	4,607	$	3,434	$	4,009

Reconciliation of Income Tax Expense

Income tax expense differed from the amounts computed by applying the U.S. Federal statutory income tax rate to income before income tax expense as follows (in thousands):


	2020			2019			2018
Statutory federal tax rate	21		%	21		%	21		%
Tax computed at statutory rate	$	5,013		$	3,999		$	4,963
Increase (reduction) resulting from:
Tax-exempt income	(395)			(424)			(430)
831(b) premium adjustment	(296)			(189)			(167)
Dividend exclusion	(5)			(7)			(7)
State taxes, net of Federal impact	118			(86)			262
Nondeductible interest expense	5			9			7
Remeasurement of deferred tax assets	—			—			(445)
Other items, net	167			132			(174)
Income tax expense	$	4,607		$	3,434		$	4,009
Effective tax rate	19.3		%	18.0		%	17.0		%

Deferred Tax Assets and Deferred Tax Liabilities

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2020 and 2019, are presented below (in thousands):


	2020		2019
Deferred tax assets:
Allowance for loan losses	$	5,393	$	6,046
Accrual for employee benefit plans	47		92
Depreciation	681		379
Deferred compensation and directors' fees	1,045		765
Operating lease liabilities	1,831		2,050

Purchase accounting adjustment – loans	1		1
Purchase accounting adjustment – fixed assets	149		149
Gain on deemed sale of securities	54		71

Accounting for defined benefit pension and other benefit plans	2,302		2,448

Nonaccrued interest	687		695
Accrued expense	158		179
Other items, net	48		38
Total gross deferred tax assets	12,396		12,913

Deferred tax liabilities:
Deferred loan fees and costs	274		592
Prepaid pension	3,344		3,189
Net unrealized gains on securities available for sale	3,124		468
Discount accretion	50		24
Core deposit intangible	1,353		1,213
REIT dividend	616		922
Operating lease right-of-use assets	1,831		2,050
Other	168		103
Total gross deferred tax liabilities	10,760		8,561
Net deferred tax asset	$	1,636	$	4,352