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INCOME TAXES | 12 Months Ended
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Dec. 31, 2020
INCOME TAXES |
INCOME TAXES | NOTE 16 – 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 income tax rate. In connection with the conversion of tax status, the Company recognized a deferred tax asset of $534,000 and an income tax benefit of $534,000. In recording the impact of the conversion to a C Corporation, the Company recorded a deferred income tax expense of $2,741,000 related to the unrealized gains (losses) on debt securities and derivatives, through the income statement in accordance with ASC 740-20-45-8; therefore, the amount shown in other comprehensive income has not been reduced by the above expense. This difference will remain in accumulated other comprehensive income until the underlying securities are sold or mature and the underlying cash flow hedging relationships terminate in accordance with the portfolio approach allowed under ASC 740. Allocation of income tax expense between current and deferred portions for the years ended December 31 is as follows:
|  | 2020 |  | 2019 |  | 2018
|  | (dollars in thousands)
Current |  |  |  |  |  |  |  |  |
Federal |  | $ | 8,358 |  | $ | 4,849 |  | $ | —
State |  |  | 4,709 |  |  | 3,102 |  |  | 869
Total current |  |  | 13,067 |  |  | 7,951 |  |  | 869
Deferred |  |  |  |  |  |  |  |  |
Federal |  |  | (226) |  |  | (1,437) |  |  | —
State |  |  | (113) |  |  | (724) |  |  | —
Change in tax status |  |  | — |  |  | (534) |  |  | —
Total deferred |  |  | (339) |  |  | (2,695) |  |  | —
Income tax expense |  | $ | 12,728 |  | $ | 5,256 |  | $ | 869
Income tax expense differs from the statutory federal rate for the years ended December 31 due to the following:
| 2020 |  | 2019 |  | 2018 |
| Amount |  | Percentage |  | Amount |  | Percentage |  | Amount |  | Percentage |
| (dollars in thousands) |
Federal income tax, at statutory rate | $ | 10,410 |  | 21.0 | % | $ | 3,933 |  | 5.5 | % | $ | — |  | — | %
Increase (decrease) resulting from: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federally tax exempt interest income |  | (1,470) |  | (3.0) |  |  | (372) |  | (0.5) |  |  | — |  | — |
State taxes, net of federal benefit |  | 3,631 |  | 7.4 |  |  | 2,212 |  | 3.1 |  |  | 869 |  | 1.3 |
Change in tax status |  | — |  | — |  |  | (534) |  | (0.8) |  |  | — |  | — |
Other |  | 157 |  | 0.3 |  |  | 17 |  | — |  |  | — |  | — |
Income tax expense | $ | 12,728 |  | 25.7 | % | $ | 5,256 |  | 7.3 | % | $ | 869 |  | 1.3 | %
The components of the deferred tax assets and liabilities are as follows:
|  | December 31, |  | December 31,
|  | 2020 |  | 2019
|  | (dollars in thousands)
Deferred tax assets |  |  |  |  |  |
Allowance for loan losses |  | $ | 9,046 |  | $ | 6,309
Compensation related |  |  | 2,301 |  |  | 5,859
Deferred loan fees |  |  | 1,595 |  |  | 497
Nonaccrual interest |  |  | 660 |  |  | 858
Foreclosed assets |  |  | 45 |  |  | 574
Goodwill |  |  | 336 |  |  | 531
Other |  |  | 1,046 |  |  | 785
Total deferred tax assets |  |  | 15,029 |  |  | 15,413
Deferred tax liabilities |  |  |  |  |  |
Fixed asset depreciation |  |  | 4,361 |  |  | 4,201
Mortgage servicing rights |  |  | 1,692 |  |  | 2,428
Other purchase accounting adjustments |  |  | 1,115 |  |  | 1,356
Intangible assets |  |  | 580 |  |  | 841
Prepaid assets |  |  | 685 |  |  | 504
Net unrealized gain on debt securities available-for-sale |  |  | 6,604 |  |  | 2,251
Other |  |  | 370 |  |  | 426
Total deferred tax liabilities |  |  | 15,407 |  |  | 12,007
Net deferred tax (liability) asset |  | $ | (378) |  |  | 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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