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9. Income Taxes
 12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes

The provision for income taxes is summarized as follows:

 

(Dollars in thousands)                  
     2020      2019      2018  
Current expense   $ 3,049       2,972       2,546  
Deferred income tax expense     (560 )     164       78  
Total income tax   $ 2,489       3,136       2,624  

 

The differences between the provision for income taxes and the amount computed by applying the statutory federal income tax rate to earnings before income taxes are as follows:

 

(Dollars in thousands)                  
     2020      2019      2018  
Tax expense at statutory rate   $ 2,908       3,613       3,361  
State income tax, net of federal income tax effect     261       351       358  
Tax-exempt interest income     (649 )     (802 )     (990 )
Increase in cash surrender value of life insurance     (80 )     (81 )     (81 )
Nondeductible interest and other expense     46       40       23  
Other     3       15       (47 )
Total   $ 2,489       3,136       2,624  

 

The following summarizes the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities. The net deferred tax asset is included as a component of other assets at December 31, 2020 and 2019.

 

(Dollars in thousands)            
     2020      2019  
Deferred tax assets:            
Allowance for loan losses   $ 2,276       1,535  
Accrued retirement expense     1,190       1,150  
Restricted stock     190       217  
Accrued bonuses     -       265  
Interest income on nonaccrual loans     1       2  
Lease liability     798       838  
Total gross deferred tax assets     4,455       4,007  
                 
Deferred tax liabilities:                
Deferred loan fees     284       343  
Accumulated depreciation     873       873  
Prepaid expenses     5       7  
ROU Asset     787       832  
Other     41       47  
Unrealized gain on available for sale securities     1,611       1,087  
Total gross deferred tax liabilities     3,601       3,189  
                 
Net deferred tax asset   $ 854       818  

 

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

 

The Company’s Federal income tax filings for years 2017 through 2020 were at year end 2020 open to audit under statutes of limitations by the Internal Revenue Service. The Company’s North Carolina income tax returns are currently under audit for tax year 2014-2016, tax years 2017, 2018 and 2019 are open to audit under the statutes of limitations by the North Carolina Department of Revenue.