NOTE 17 – Income Taxes

The components of income tax expense were as follows:


	For the years ended December 31,
(dollars in thousands)	2019			2018		2017
Current income taxes:
Federal	$	6,791		5,536		7,139
State		1,250		990		573
Total current tax expense		8,041		6,526		7,712
Deferred income tax expense (benefit)		(420	)	(125	)	2,904
Income tax expense	$	7,621		6,401		10,616

The following is a summary of the items that caused recorded income taxes to differ from taxes computed using the statutory tax rate:


	For the years ended December 31,
(dollars in thousands)	2019			2018		2017
Tax expense at statutory rate	$	7,451		6,025		8,281
Effect of state income taxes, net of federal benefit		987		782		372
Exempt income		(26	)	(34	)	(146	)
Effect of change in federal tax rate		-		-		2,441
Effect of stock-based compensation		(693	)	(248	)	(2	)
Other		(98	)	(124	)	(330	)
Income tax expense	$	7,621		6,401		10,616

Income tax expense for the year ended December 31, 2017 was impacted by the adjustment of our deferred tax assets and liabilities related to the reduction in the U.S. federal statutory income tax rate to 21% under the Tax Act, which was enacted on December 22, 2017. As a result of the new law, we recognized a provisional net tax expense totaling $2.4 million, as noted in the table above.

The components of the deferred tax assets and liabilities are as follows:


	December 31,
(dollars in thousands)	2019		2018
Deferred tax assets:
Allowance for loan losses	$	3,495	3,310
Unrealized loss on securities available for sale		79	244
Net deferred loan fees		697	592
Deferred compensation		1,404	1,280
Sale of real estate owned		-	128
Lease liabilities		4,219	-
Other		234	130
		10,128	5,684
Deferred tax liabilities:
Property and equipment		1,398	1,433
Hedging transactions		227	112
Prepaid expenses		132	107
Right-of-use assets		4,096	-
Other		-	12
		5,853	1,664
Net deferred tax asset	$	4,275	4,020

The Company has analyzed the tax positions taken or expected to be taken in its tax returns and concluded it has no liability related to uncertain tax positions.