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Note 14 - Federal and State Income Taxes | 12 Months Ended
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Dec. 31, 2020
Notes to Financial Statements |
Federal and State Income Taxes | Note 14. Federal and State Income Taxes Federal and state income tax expense was comprised of the following components for the years ended December 31, 2020, 2019, and 2018: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2020 |  | 2019 |  | 2018
​ | ​ | (dollars in thousands)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Current | ​ | $ | 27,237 | ​ | $ | 8,255 | ​ | $ | 2,723
Deferred | ​ |  | (14,530) | ​ |  | 6,364 | ​ |  | 6,292
​ | ​ | $ | 12,707 | ​ | $ | 14,619 | ​ | $ | 9,015
​ A reconciliation of the expected federal income tax expense to the income tax expense included in the consolidated statements of income was as follows for the years ended December 31, 2020, 2019, and 2018: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Year Ended December 31, |
​ | ​ | 2020 | ​ | 2019 | ​ | 2018 |
​ | ​ | ​ | ​ | ​ | % of | ​ | ​ | ​ | ​ | % of | ​ | ​ | ​ | ​ | % of |
​ | ​ | ​ | ​ | ​ | Pretax | ​ | ​ | ​ | ​ | Pretax | ​ | ​ | ​ | ​ | Pretax |
​ |  | Amount |  | Income |  | Amount |  | Income |  | Amount |  | Income |
​ | ​ | (dollars in thousands)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Computed "expected" tax expense | ​ | $ | 15,391 |  | 21.0 | % | $ | 15,126 |  | 21.0 | % | $ | 10,948 |  | 21.0 | %
Tax exempt income, net | ​ |  | (5,943) |  | (8.1) | ​ |  | (4,470) |  | (6.2) | ​ |  | (3,958) |  | (7.6) | ​
Bank-owned life insurance | ​ |  | (308) |  | (0.4) | ​ |  | (360) |  | (0.5) | ​ |  | (343) |  | (0.6) | ​
State income taxes, net of federal benefit, current year | ​ |  | 3,622 |  | 4.9 | ​ |  | 3,668 |  | 5.1 | ​ |  | 2,681 |  | 5.2 | ​
Change in unrecognized tax benefits | ​ |  | 546 |  | 0.7 | ​ |  | (93) |  | (0.1) | ​ |  | (45) |  | (0.1) | ​
Goodwill impairment | ​ | ​ | 105 | ​ | 0.1 | ​ | ​ | 630 | ​ | 0.9 | ​ | ​ | — | ​ | — | ​
Intended liquidation of bank-owned life insurance | ​ | ​ | — | ​ | — | ​ | ​ | 790 | ​ | 1.1 | ​ | ​ | — | ​ | — | ​
Tax credits | ​ |  | (456) |  | (0.6) | ​ |  | (705) |  | (1.0) | ​ |  | (154) |  | (0.3) | ​
Acquisition costs | ​ |  | — |  | — | ​ |  | — |  | — | ​ |  | 227 |  | 0.4 | ​
Excess tax benefit on stock options exercised and restricted stock awards vested | ​ |  | (242) |  | (0.3) | ​ |  | (287) |  | (0.4) | ​ |  | (425) |  | (0.8) | ​
Other | ​ |  | (215) |  | (0.3) | ​ |  | 320 |  | 0.4 | ​ |  | 84 |  | 0.1 | ​
Federal and state income tax expense | ​ | $ | 12,707 |  | 17.3 | % | $ | 14,619 |  | 20.3 | % | $ | 9,015 |  | 17.3 | %
​ Changes in the unrecognized tax benefits included in other liabilities are as follows for the years ended December 31, 2020 and 2019: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2020 |  | 2019
​ | ​ | (dollars in thousands)
​ | ​ | ​ | ​ | ​ | ​ | ​
Balance, beginning | ​ | $ | 1,254 | ​ | $ | 1,249
Impact of tax positions taken during current year | ​ |  | 787 | ​ |  | 375
Gross increase (decrease) related to tax positions of prior years | ​ |  | 39 | ​ |  | 44
Reduction as a result of a lapse of the applicable statute of limitations | ​ |  | (187) | ​ |  | (414)
Balance, ending | ​ | $ | 1,893 | ​ | $ | 1,254
​ Included in the unrecognized tax benefits liability at December 31, 2020 are potential benefits of approximately $1.4 million that, if recognized, would affect the effective tax rate. The liability for unrecognized tax benefits includes accrued interest for tax positions, which either do not meet the more-likely-than-not recognition threshold or where the tax benefit is measured at an amount less than the tax benefit Note 14. Federal and State Income Taxes (continued) claimed or expected to be claimed on an income tax return. At December 31, 2020 and 2019, accrued interest on uncertain tax positions was approximately $277 thousand and $232 thousand, respectively. Estimated interest related to the underpayment of income taxes is classified as a component of “income tax expense” in the statements of income. The Company’s federal income tax returns are open and subject to examination from the 2017 tax return year and later. Various state franchise and income tax returns are generally open from the 2016 and later tax return years based on individual state statutes of limitations. The net deferred tax liabilities consisted of the following as of December 31, 2020 and 2019: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2020 |  | 2019
​ | ​ | (dollars in thousands)
Deferred tax assets: |  | ​ |  |  | ​ |
Historic tax credits | ​ | $ | 68 | ​ | $ | 68
Net unrealized losses on securities available for sale and derivative instruments | ​ |  | — | ​ |  | 126
Compensation | ​ |  | 10,288 | ​ |  | 8,433
Loan/lease losses | ​ |  | 20,016 | ​ |  | 11,332
Net operating loss carryforwards, federal and state | ​ |  | 628 | ​ |  | 739
Other | ​ |  | 71 | ​ |  | 605
​ | ​ |  | 31,071 | ​ |  | 21,303
Deferred tax liabilities: | ​ |  |  | ​ |  |
Net unrealized gains on securities available for sale and derivative instruments | ​ | ​ | 869 | ​ | ​ | —
Premises and equipment | ​ |  | 5,737 | ​ |  | 4,616
Equipment financing leases | ​ |  | 13,373 | ​ |  | 16,252
Acquisition fair value adjustments | ​ |  | 3,351 | ​ |  | 3,963
Intended liquidation of bank-owned life insurance | ​ | ​ | — | ​ | ​ | 850
Gain on sale of assets and liabilities of subsidiary | ​ | ​ | — | ​ | ​ | 794
Investment accretion | ​ |  | 28 | ​ |  | 28
Deferred loan origination fees, net | ​ |  | 197 | ​ |  | 704
Other | ​ |  | 922 | ​ |  | 832
​ | ​ |  | 24,477 | ​ |  | 28,039
Net deferred tax liabilities | ​ | $ | 6,594 | ​ | $ | (6,736)
​ At December 31, 2020, the Company had $3.0 million of federal tax net operating loss carryforwards which are set to expire in varying amounts between 2029 and 2033. At December 31, 2020, the Company had $2.1 million of state tax net operating loss carryforwards which are set to expire in varying amounts between 2023 and 2028. All of the federal tax net operating loss carryforwards and the state tax net operating loss carryforwards were acquired from Community National and CNB. Note 14. Federal and State Income Taxes (continued) The change in deferred income taxes was reflected in the Consolidated Financial Statements as follows for the years ended December 31, 2020, 2019, and 2018: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2020 |  | 2019 |  | 2018
​ | ​ | (dollars in thousands)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Provision for income taxes | ​ | $ | (14,530) | ​ | $ | 6,364 | ​ | $ | 6,292
Net deferred tax asset resulting from market value adjustments of acquisitions | ​ |  | — | ​ |  | (381) | ​ |  | (52)
Net deferred tax assets resulting from sale of other subsidiary | ​ | ​ | 363 | ​ | ​ | — | ​ | ​ | —
Net deferred tax liabilities resulting from sale of bank subsidiary | ​ | ​ | — | ​ | ​ | (1,644) | ​ | ​ | —
Statement of stockholders' equity- Other comprehensive income (loss) | ​ |  | 837 | ​ |  | 1,433 | ​ |  | (1,000)
​ | ​ | $ | (13,330) | ​ | $ | 5,772 | ​ | $ | 5,240
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ ​

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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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