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INCOME TAXES | 9 Months Ended
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Sep. 30, 2020
INCOME TAXES |
INCOME TAXES | NOTE 12 – INCOME TAXES Effective October 11, 2019, the Company voluntarily revoked its S Corporation status and became a taxable entity (C Corporation). As such, any periods prior to October 11, 2019 will only reflect an effective state replacement tax rate. The consolidated statements of income present unaudited pro forma C Corp equivalent information for the three and nine months ended September 30, 2019. Allocation of income tax expense between current and deferred portions for the three and nine months ended September 30 is as follows:
|  | Three Months Ended |  | Nine Months Ended
|  | September 30, |  | September 30,
|  | 2020 |  | 2019 |  | 2020 |  | 2019
|  | (dollars in thousands)
Current |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 2,921 |  | $ | — |  | $ | 5,619 |  | $ | —
State |  |  | 1,593 |  |  | 299 |  |  | 3,218 |  |  | 819
Total current |  |  | 4,514 |  |  | 299 |  |  | 8,837 |  |  | 819
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (542) |  |  | — |  |  | (419) |  |  | —
State |  |  | (271) |  |  | — |  |  | (209) |  |  | —
Total deferred |  |  | (813) |  |  | — |  |  | (628) |  |  | —
Income tax expense |  | $ | 3,701 |  | $ | 299 |  | $ | 8,209 |  | $ | 819
Income tax expense differs from the statutory federal rate for the three and nine months ended September 30 due to the following:
|  | Three Months Ended September 30, |
|  | 2020 |  | 2019 |
|  | Amount |  | Percentage |  | Amount |  | Percentage |
|  | (dollars in thousands) |
Federal income tax, at statutory rate |  | $ | 2,995 |  | 21.0 | % | $ | — |  | — | %
Increase (decrease) resulting from: |  |  |  |  |  |  |  |  |  |  |
Federally tax exempt interest income |  |  | (372) |  | (2.6) |  |  | — |  | — |
State taxes, net of federal benefit |  |  | 1,039 |  | 7.3 |  |  | 299 |  | 1.7 |
Other |  |  | 39 |  | 0.2 |  |  | — |  | — |
Income tax expense |  | $ | 3,701 |  | 25.9 | % | $ | 299 |  | 1.7 | %
|  | Nine Months Ended September 30, |
|  | 2020 |  | 2019 |
|  | Amount |  | Percentage |  | Amount |  | Percentage |
|  | (dollars in thousands) |
Federal income tax, at statutory rate |  | $ | 6,806 |  | 21.0 | % | $ | — |  | — | %
Increase (decrease) resulting from: |  |  |  |  |  |  |  |  |  |  |
Federally tax exempt interest income |  |  | (1,099) |  | (3.4) |  |  | — |  | — |
State taxes, net of federal benefit |  |  | 2,397 |  | 7.4 |  |  | 819 |  | 1.6 |
Other |  |  | 105 |  | 0.3 |  |  | — |  | — |
Income tax expense |  | $ | 8,209 |  | 25.3 | % | $ | 819 |  | 1.6 | %
The components of the net deferred tax asset as of September 30, 2020 and December 31, 2019 are as follows:
|  | September 30, |  | December 31,
|  | 2020 |  | 2019
|  | (dollars in thousands)
Deferred tax assets |  |  |  |  |  |
Allowance for loan losses |  | $ | 8,927 |  | $ | 6,309
Compensation related |  |  | 2,156 |  |  | 5,859
Deferred loan fees |  |  | 1,937 |  |  | 497
Nonaccrual interest |  |  | 617 |  |  | 858
Foreclosed assets |  |  | 93 |  |  | 574
Goodwill |  |  | 385 |  |  | 531
Other |  |  | 1,084 |  |  | 785
Total deferred tax assets |  |  | 15,199 |  |  | 15,413
Deferred tax liabilities |  |  |  |  |  |
Fixed asset depreciation |  |  | 4,363 |  |  | 4,201
Mortgage servicing rights |  |  | 1,588 |  |  | 2,428
Other purchase accounting adjustments |  |  | 1,195 |  |  | 1,356
Intangible assets |  |  | 645 |  |  | 841
Prepaid assets |  |  | 475 |  |  | 504
Net unrealized gain on debt securities available-for-sale |  |  | 6,632 |  |  | 2,251
Other |  |  | 381 |  |  | 426
Total deferred tax liabilities |  |  | 15,279 |  |  | 12,007
Net deferred tax asset (liability) |  | $ | (80) |  |  | 3,406

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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