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INCOME TAXES

12 Months Ended

Dec. 31, 2021

INCOME TAXES

INCOME TAXES

NOTE 17 – 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:

​

​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31,
​		2021			2020			2019
​	​	(dollars in thousands)
Current	​	​	​	​	​	​	​	​	​
Federal	​	$	11,330	​	$	8,358	​	$	4,849
State	​	​	6,053	​	​	4,709	​	​	3,102
Total current	​	​	17,383	​	​	13,067	​	​	7,951
​	​	​	​	​	​	​	​	​	​
Deferred	​	​	​	​	​	​	​	​	​
Federal	​	​	1,945	​	​	(226)	​	​	(1,437)
State	​	​	963	​	​	(113)	​	​	(724)
Change in tax status	​	​	—	​	​	—	​	​	(534)
Total deferred	​		2,908	​		(339)	​		(2,695)
Income tax expense	​	$	20,291	​	$	12,728	​	$	5,256

​

Income tax expense differs from the statutory federal rate for the years ended December 31 due to the following:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Year Ended December 31,

​

2021

2020

2019

​

​

Amount

Percentage

​

Amount

Percentage

​

Amount

Percentage

​

​

(dollars in thousands)

​

Federal income tax, at statutory rate

​

$

16,078

​

21.0

%

$

10,410

​

21.0

%

$

3,933

​

5.5

%

Increase (decrease) resulting from:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Federally tax exempt interest income

​

​

(1,426)

​

(1.9)

​

​

(1,470)

​

(3.0)

​

​

(372)

​

(0.5)

​

State taxes, net of federal benefit

​

5,430

7.1

​

​

3,631

7.4

​

​

2,212

3.1

​

Change in tax status

​

—

—

​

​

—

—

​

​

(534)

(0.8)

​

Other

​

209

0.3

​

​

157

0.3

​

​

17

—

​

Income tax expense

​

$

20,291

26.5

%

$

12,728

25.7

%

$

5,256

7.3

%

​

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

​

​	​	​	​	​	​	​
​	​	December 31, 2021		​	December 31, 2020
​	​	(dollars in thousands)
Deferred tax assets		​	​		​	​
Allowance for loan losses	​	$	6,756		$	9,046
Compensation related	​	​	2,314		​	2,301
Deferred loan fees	​	​	1,059	​	​	1,595
Nonaccrual interest		​	489	​	​	660
Foreclosed assets		​	43	​	​	45
Goodwill		​	316	​	​	336
Net unrealized losses on debt securities	​	​	304	​	​	—
Other		​	853	​	​	1,011
Total deferred tax assets		​	12,134	​	​	14,994
​	​	​	​	​	​	​
Deferred tax liabilities	​	​	​	​	​	​
Fixed asset depreciation		​	4,188	​	​	4,361
Mortgage servicing rights		​	2,262	​	​	1,692
Other purchase accounting adjustments	​	​	776	​	​	1,115
Intangible assets	​	​	374	​	​	580
Prepaid assets		​	664	​	​	685
Net unrealized gains on debt securities		​	—	​	​	6,569
Other		​	505	​	​	370
Total deferred tax liabilities		​	8,769	​	​	15,372
Net deferred tax asset (liability)	​	$	3,365	​	$	(378)

​

X

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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=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 http://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
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-Section 50
-Paragraph 17
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-URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
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-URI http://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 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
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
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