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Note 14 - Federal and State Income Taxes | 12 Months Ended
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Dec. 31, 2022
Notes to Financial Statements |
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, 2022, 2021, and 2020: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2022 |  | 2021 |  | 2020
​ | ​ | (dollars in thousands)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Current | ​ | $ | 19,165 | ​ | $ | 7,290 | ​ | $ | 27,237
Deferred | ​ |  | (4,682) | ​ |  | 15,272 | ​ |  | (14,530)
​ | ​ | $ | 14,483 | ​ | $ | 22,562 | ​ | $ | 12,707
​ 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, 2022, 2021, and 2020: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Year Ended December 31, |
​ | ​ | ​ | ​ | 2022 | ​ | 2021 | ​ | 2020 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | % of | ​ | ​ | ​ | ​ | % of | ​ | ​ | ​ | ​ | % of |
​ | ​ | ​ | ​ | ​ | ​ | ​ | Pretax | ​ | ​ | ​ | ​ | Pretax | ​ | ​ | ​ | ​ | Pretax |
​ |  | ​ |  | Amount |  | Income |  | Amount |  | Income |  | Amount |  | Income |
​ | ​ | ​ | ​ | (dollars in thousands)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Computed "expected" tax expense | ​ | ​ | ​ | $ | 23,845 |  | 21.0 | % | $ | 25,508 |  | 21.0 | % | $ | 15,391 |  | 21.0 | %
Tax exempt income, net | ​ | ​ | ​ |  | (10,689) |  | (9.4) | ​ |  | (7,537) |  | (6.2) | ​ |  | (5,943) |  | (8.1) | ​
Bank-owned life insurance | ​ | ​ | ​ |  | (432) |  | (0.4) | ​ |  | (386) |  | (0.3) | ​ |  | (308) |  | (0.4) | ​
State income taxes, net of federal benefit, current year | ​ | ​ | ​ |  | 4,482 |  | 3.9 | ​ |  | 5,089 |  | 4.2 | ​ |  | 3,622 |  | 4.9 | ​
Change in unrecognized tax benefits | ​ | ​ | ​ |  | 498 |  | 0.4 | ​ |  | 578 |  | 0.5 | ​ |  | 546 |  | 0.7 | ​
Goodwill impairment | ​ | ​ | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | 105 | ​ | 0.1 | ​
Provision adjustment from accounting method change | ​ | ​ | ​ | ​ | (1,181) | ​ | (1.0) | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | — | ​
Tax credits | ​ | ​ | ​ |  | (1,362) |  | (1.2) | ​ |  | 34 |  | — | ​ |  | (456) |  | (0.6) | ​
Acquisition costs | ​ | ​ | ​ |  | 276 |  | 0.2 | ​ |  | 95 |  | 0.1 | ​ |  | — |  | — | ​
Excess tax benefit on stock options exercised and restricted stock awards vested | ​ | ​ | ​ |  | (503) |  | (0.4) | ​ |  | (436) |  | (0.4) | ​ |  | (242) |  | (0.3) | ​
Re-measurement of deferred tax asset to incorporate newly enacted tax rates | ​ | ​ | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | — | ​ | ​ | 207 | ​ | 0.3 | ​
Other | ​ | ​ | ​ |  | (451) |  | (0.4) | ​ |  | (383) |  | (0.3) | ​ |  | (215) |  | (0.3) | ​
Federal and state income tax expense | ​ | ​ | ​ | $ | 14,483 |  | 12.7 | % | $ | 22,562 |  | 18.6 | % | $ | 12,707 |  | 17.3 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ Changes in the unrecognized tax benefits included in other liabilities are as follows for the years ended December 31, 2022 and 2021: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2022 |  | 2021
​ | ​ | (dollars in thousands)
​ | ​ | ​ | ​ | ​ | ​ | ​
Balance, beginning | ​ | $ | 2,182 | ​ | $ | 1,893
Impact of tax positions taken during current year | ​ |  | 758 | ​ |  | 1,326
Gross increase (decrease) related to tax positions of prior years | ​ |  | 75 | ​ |  | (646)
Reduction as a result of a lapse of the applicable statute of limitations | ​ |  | (335) | ​ |  | (391)
Balance, ending | ​ | $ | 2,680 | ​ | $ | 2,182
​ Included in the unrecognized tax benefits liability at December 31, 2022 are potential benefits of approximately $2.2 million that, if recognized, would affect the effective tax rate. ​ Note 14. Federal and State Income Taxes (continued) 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 claimed or expected to be claimed on an income tax return. At December 31, 2022 and 2021, accrued interest on uncertain tax positions was approximately $333 thousand and $236 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 2019 tax return year and later. Various state franchise and income tax returns are generally open from the 2018 and later tax return years based on individual state statutes of limitations. The net deferred tax assets consisted of the following as of December 31, 2022 and 2021: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2022 |  | 2021
​ | ​ | (dollars in thousands)
Deferred tax assets: |  | ​ |  |  | ​ |
Historic tax credits | ​ | $ | 68 | ​ | $ | 68
Low income housing tax credits | ​ |  | 226 | ​ |  | —
Net unrealized losses on securities available for sale and derivative instruments | ​ |  | 21,319 | ​ |  | —
Compensation | ​ |  | 13,413 | ​ |  | 11,912
Loan/lease losses | ​ |  | 20,466 | ​ |  | 19,023
Net operating loss carryforwards, federal and state | ​ |  | 1,262 | ​ |  | 1,354
Other | ​ |  | — | ​ |  | 17
​ | ​ |  | 56,754 | ​ |  | 32,374
Deferred tax liabilities: | ​ |  |  | ​ |  |
Net unrealized gains on securities available for sale and derivative instruments | ​ | ​ | — | ​ | ​ | 747
Premises and equipment | ​ |  | 6,271 | ​ |  | 6,099
Equipment financing leases | ​ |  | 2,484 | ​ |  | 6,462
Acquisition fair value adjustments | ​ |  | 3,816 | ​ |  | 3,269
Investment accretion | ​ |  | 27 | ​ |  | 27
Deferred loan origination fees, net | ​ |  | 1,624 | ​ |  | 1,403
Other | ​ |  | 2,094 | ​ |  | 677
​ | ​ |  | 16,316 | ​ |  | 18,684
Net deferred tax assets | ​ | $ | 40,438 | ​ | $ | 13,690
​ | ​ | ​ | ​ | ​ | ​ | ​
​ At December 31, 2022, the Company had $5.4 million of federal tax NOL carryforwards and $2.1 million of state tax NOL carryforwards. $1.9 million of the federal tax NOL carryforwards are related to the acquisition of Community National and CNB and these losses are set to expire in varying amounts between 2029 and 2033. The $2.1 million of the state tax NOL carryforwards are also related to the acquisition of Community National and CNB and are set to expire in varying amounts between 2023 and 2028. The additional $3.5 million of federal tax NOLs were acquired in 2022 with the Guaranty Bank acquisition. The newly acquired federal tax NOLs are expected to be utilized prior to their expiration dates. 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, 2022, 2021, and 2020: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2022 |  | 2021 |  | 2020
​ | ​ | (dollars in thousands)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Provision for income taxes | ​ | $ | (4,682) | ​ | $ | 15,272 | ​ | $ | (14,530)
Net deferred tax assets resulting from sale of other subsidiary | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 363
Statement of stockholders' equity- Other comprehensive income (loss) | ​ |  | (22,066) | ​ |  | (122) | ​ |  | 837
​ | ​ | $ | (26,748) | ​ | $ | 15,150 | ​ | $ | (13,330)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​

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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 https://asc.fasb.org/extlink&oid=121826272&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 https://asc.fasb.org/extlink&oid=122134291&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 https://asc.fasb.org/extlink&oid=121826272&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 https://asc.fasb.org/extlink&oid=122134291&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 https://asc.fasb.org/extlink&oid=121826272&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 https://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 https://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 https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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