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Note 10 - Federal Income Taxes

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 10 - FEDERAL INCOME TAXES

The consolidated income tax expense is as follows: 

		2022				2021				2020
Current expense		$	16,080,000			$	12,675,000			$	14,945,000
Deferred expense			(1,353,000	)			2,020,000				(4,141,000	)
Change in valuation allowance			0				0				(94,000	)
Tax expense		$	14,727,000			$	14,695,000			$	10,710,000

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:

		2022				2021				2020
Tax at statutory rate		$	15,915,000			$	15,481,000			$	11,518,000
Increase (decrease) from
Tax-exempt interest			(695,000	)			(658,000	)			(681,000	)
Bank owned life insurance			(334,000	)			(233,000	)			(238,000	)
Change in valuation allowance			0				0				(94,000	)
Other			(159,000	)			105,000				205,000
Tax expense		$	14,727,000			$	14,695,000			$	10,710,000

The statutory tax rate was 21% for 2022, 2021 and 2020.

Significant components of deferred tax assets and liabilities, included in other assets on our Consolidated Balance Sheets, as of December 31, 2022 and 2021 are as follows: 

		2022				2021
Deferred income tax assets
Allowance for credit losses		$	8,872,000			$	7,426,000
Deferred compensation			232,000				259,000
Stock compensation			1,018,000				941,000
Nonaccrual loan interest income			136,000				159,000
Unrealized loss on securities			17,369,000				991,000
Lease liability			810,000				749,000
Deferred loan fees and costs			0				520,000
Other			494,000				595,000
Deferred tax asset			28,931,000				11,640,000
Deferred income tax liabilities
Depreciation			697,000				1,168,000
Prepaid expenses			504,000				416,000
Core deposit intangible			120,000				276,000
Mortgage loan servicing rights			2,486,000				2,572,000
Deferred loan fees and costs			211,000				0
Right of use lease asset			810,000				749,000
Business combination adjustments			1,877,000				2,013,000
Other			326,000				193,000
Deferred tax liability			7,031,000				7,387,000
Total net deferred tax asset		$	21,900,000			$	4,253,000

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. We determined that no valuation allowance was required at year-end 2022 or 2021. We had no unrecognized tax benefits at any time during 2022 or 2021 and do not anticipate any significant increase in unrecognized tax benefits during 2023. 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 2022 or 2021. Our U.S. federal income tax returns are no longer subject to examination for all years before 2019.

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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.

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