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Note 10 - Federal Income Taxes | 12 Months Ended
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Dec. 31, 2020
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | NOTE 1 0 - FEDERAL INCOME TAXES The consolidated income tax expense is as follows:
|  | 2020 |  |  | 2019 |  |  | 2018 |
Current expense |  | $ | 14,945,000 |  |  | $ | 10,978,000 |  |  | $ | 10,170,000 |
Deferred expense |  |  | (4,141,000 | ) |  |  | 26,000 |  |  |  | (372,000 | )
Change in valuation allowance |  |  | (94,000 | ) |  |  | 0 |  |  |  | 0 |
Tax expense |  | $ | 10,710,000 |  |  | $ | 11,004,000 |  |  | $ | 9,798,000 |
A reconciliation of the differences between the federal income tax expense recorded and the amount computed by applying the federal statutory rate to income before income taxes is as follows:
|  | 2020 |  |  | 2019 |  |  | 2018 |
Tax at statutory rate |  | $ | 11,518,000 |  |  | $ | 12,697,000 |  |  | $ | 10,883,000 |
Increase (decrease) from |  |  |  |  |  |  |  |  |  |  |  |
Tax-exempt interest |  |  | (681,000 | ) |  |  | (644,000 | ) |  |  | (620,000 | )
Bank owned life insurance |  |  | (238,000 | ) |  |  | (804,000 | ) |  |  | (201,000 | )
Change in valuation allowance |  |  | (94,000 | ) |  |  | 0 |  |  |  | 0 |
Other |  |  | 205,000 |  |  |  | (245,000 | ) |  |  | (264,000 | )
Tax expense |  | $ | 10,710,000 |  |  | $ | 11,004,000 |  |  | $ | 9,798,000 |
The statutory tax rate was 21% for 2020, 2019 and 2018. Significant components of deferred tax assets and liabilities as of December 31, 2020 and 2019 are as follows:
|  | 2020 |  |  | 2019 |
Deferred income tax assets |  |  |  |  |  |  |  |
Allowance for loan losses |  | $ | 7,973,000 |  |  | $ | 5,017,000 |
Deferred compensation |  |  | 511,000 |  |  |  | 577,000 |
Stock compensation |  |  | 541,000 |  |  |  | 720,000 |
Nonaccrual loan interest income |  |  | 211,000 |  |  |  | 239,000 |
Deferred loan fees |  |  | 924,000 |  |  |  | 104,000 |
Capital loss carryforward |  |  | 0 |  |  |  | 94,000 |
Fair value write-downs on foreclosed properties |  |  | 537,000 |  |  |  | 26,000 |
Other |  |  | 938,000 |  |  |  | 683,000 |
Deferred tax asset before valuation allowance |  |  | 11,635,000 |  |  |  | 7,460,000 |
Valuation allowance |  |  | 0 |  |  |  | (94,000 | )
Deferred tax asset after valuation allowance |  |  | 11,635,000 |  |  |  | 7,366,000 |
Deferred income tax liabilities |  |  |  |  |  |  |  |
Depreciation |  |  | 1,175,000 |  |  |  | 1,743,000 |
Prepaid expenses |  |  | 297,000 |  |  |  | 269,000 |
Core deposit intangible |  |  | 498,000 |  |  |  | 787,000 |
Mortgage loan servicing rights |  |  | 1,720,000 |  |  |  | 977,000 |
Unrealized gain on securities |  |  | 1,458,000 |  |  |  | 982,000 |
Business combination adjustments |  |  | 2,142,000 |  |  |  | 2,058,000 |
Other |  |  | 521,000 |  |  |  | 485,000 |
Deferred tax liability |  |  | 7,811,000 |  |  |  | 7,301,000 |
Total net deferred tax asset |  | $ | 3,824,000 |  |  | $ | 65,000 |
A valuation allowance related to deferred tax assets is required when it is considered more likely than not that all or part of the benefits related to such assets will not be realized. At December 31, 2019, we carried a valuation allowance of $0.1 million against capital loss carryforwards generated by the disposal of certain capital investments acquired in our merger with Firstbank. The $0.1 million of capital loss carryforwards expired at December 31, 2020 and we no longer carry this asset or the valuation allowance against it. We had no unrecognized tax benefits at any time during 2020 or 2019 and do not anticipate any significant increase in unrecognized tax benefits during 2021. Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is our policy to record such accruals in our income tax accounts; no such accruals existed at any time during 2020 or 2019. Our U.S. federal income tax returns are no longer subject to examination for all years before 2017.

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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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