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Note 15 - Income Taxes | 12 Months Ended
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Dec. 31, 2019
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | Note 1 5 . Income Taxes The Tax Reform Act was enacted on December 22, 2017. Among other things, the new law establishes a new, flat corporate federal statutory income tax rate of 21%; eliminates the corporate alternative minimum tax and allows the use of any such carryforwards to offset regular tax liability for any taxable year; limits the deduction for net interest expense incurred by U.S. corporations; allows businesses to immediately expense the cost of new investments in certain qualified depreciable assets for tax purposes; eliminates or reduces certain deductions related to meals and entertainment expenses; modifies the limitation on excessive employee remuneration to eliminate the exception for performance-based compensation and clarifies the definition of a covered employee; and limits the deductibility of deposit insurance premiums. The Tax Reform Act also significantly changes U.S. tax law related to foreign operations, however, such changes do not currently impact the Company. As a result of the Tax Reform Act, the Company recognized additional tax expense totaling $6.55 million during the fourth quarter of 2017 related to the revaluation of our deferred tax balances, which included provisional estimates primarily related to certain purchase accounting, indemnification asset, intangible, and depreciation items. During the third quarter of 2018, the Company completed the deferred tax asset revaluation and recorded a $1.67 million reduction in tax expense. Income tax expense is comprised of current and deferred, federal and state income taxes on the Company’s pre-tax earnings. The following table presents the components of the income tax provision for the periods indicated:
|  | Year Ended December 31, |
(Amounts in thousands) |  | 2019 |  |  | 2018 |  |  | 2017 |
Current tax expense (benefit): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 9,603 |  |  | $ | 7,201 |  |  | $ | 14,509 |
State |  |  | 1,554 |  |  |  | 1,233 |  |  |  | 926 |
Total current tax expense |  |  | 11,157 |  |  |  | 8,434 |  |  |  | 15,435 |
Deferred tax expense (benefit): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (152 | ) |  |  | 296 |  |  |  | 5,205 |
State |  |  | (11 | ) |  |  | 52 |  |  |  | (12 | )
Total deferred tax expense (benefit) |  |  | (163 | ) |  |  | 348 |  |  |  | 5,193 |
Total income tax expense |  | $ | 10,994 |  |  | $ | 8,782 |  |  | $ | 20,628 |
The Company’s effective tax rate, income tax as a percent of pre-tax income, may vary significantly from the statutory rate due to permanent differences and available tax credits. Permanent differences are income and expense items excluded by law in the calculation of taxable income. The Company’s most significant permanent differences generally include interest income on municipal securities and increases in the cash surrender value of life insurance policies. The following table reconciles the Company’s income tax expense to the amount computed by applying the federal statutory tax rate to pre-tax income for the periods indicated:
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
|  | Amount |  |  | Percent |  |  | Amount |  |  | Percent |  |  | Amount |  |  | Percent |
(Amounts in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Federal income tax at the statutory rate |  | $ | 10,457 |  |  |  | 21.00 | % |  | $ | 9,475 |  |  |  | 21.00 | % |  | $ | 14,739 |  |  |  | 35.00 | %
State income tax, net of federal benefit |  |  | 1,220 |  |  |  | 3.12 | % |  |  | 1,016 |  |  |  | 2.25 | % |  |  | 692 |  |  |  | 1.64 | %
|  |  | 11,677 |  |  |  | 24.12 | % |  |  | 10,491 |  |  |  | 23.25 | % |  |  | 15,431 |  |  |  | 36.64 | %
Increase (decrease) resulting from: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Tax-exempt interest income |  |  | (637 | ) |  |  | (1.28 | )% |  |  | (702 | ) |  |  | -1.56 | % |  |  | (1,228 | ) |  |  | -2.92 | %
Nondeductible goodwill impairment and disposition |  |  | - |  |  |  | 0.00 | % |  |  | 569 |  |  |  | 1.26 | % |  |  | - |  |  |  | 0.00 | %
Bank owned life insurance |  |  | (249 | ) |  |  | (0.50 | )% |  |  | (144 | ) |  |  | -0.32 | % |  |  | (478 | ) |  |  | -1.13 | %
Deferred tax revaluation |  |  | (98 | ) |  |  | (0.20 | )% |  |  | (1,669 | ) |  |  | -3.70 | % |  |  | 6,552 |  |  |  | 15.56 | %
Other items, net |  |  | 301 |  |  |  | 0.10 | % |  |  | 237 |  |  |  | 0.53 | % |  |  | 351 |  |  |  | 0.83 | %
Income tax at the effective tax rate |  | $ | 10,994 |  |  |  | 22.24 | % |  | $ | 8,782 |  |  |  | 19.46 | % |  | $ | 20,628 |  |  |  | 48.98 | %
Deferred taxes derived from continuing operations reflect the net effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for tax purposes. The following table presents the significant components of the net deferred tax asset as of the dates indicated:
|  | December 31, |
(Amounts in thousands) |  | 2019 |  |  | 2018 |
Deferred tax assets |  |  |  |  |  |  |  |
Allowance for loan losses |  | $ | 4,312 |  |  | $ | 4,275 |
Unrealized losses on available-for-sale securities |  |  | - |  |  |  | 87 |
Unrealized asset losses |  |  | 540 |  |  |  | 730 |
Purchase accounting |  |  | 3,689 |  |  |  | 24 |
FDIC assisted transactions |  |  | 1,597 |  |  |  | 1,510 |
Intangible assets |  |  | 745 |  |  |  | 2,430 |
Deferred compensation assets |  |  | 4,079 |  |  |  | 3,468 |
Federal net operating loss carryforward |  |  | 4,279 |  |  |  | - |
Deferred loan fees |  |  | 1,247 |  |  |  | 1,201 |
Other |  |  | 1,746 |  |  |  | 491 |
Total deferred tax assets |  |  | 22,234 |  |  |  | 14,216 |
Deferred tax liabilities |  |  |  |  |  |  |  |
FDIC indemnification asset |  |  | 675 |  |  |  | 1,195 |
Fixed assets |  |  | 1,080 |  |  |  | 1,381 |
Odd days interest deferral |  |  | 1,912 |  |  |  | 1,614 |
Unrealized gains on available for sale securities |  |  | 230 |  |  |  | - |
Other |  |  | 399 |  |  |  | 460 |
Total deferred tax liabilities |  |  | 4,296 |  |  |  | 4,650 |
Net deferred tax asset |  | $ | 17,938 |  |  | $ | 9,566 |
The Company had no unrecognized tax benefits or accrued interest or penalties as of December 31, 2019 or 2018. The Company had no deferred tax valuation allowance recorded as of December 31, 2019 or 2018, as management believes it is more likely than not that all of the deferred tax assets will be realized against deferred tax liabilities and projected future taxable income. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and various state tax departments for the years ended December 31, 2016 through 2018.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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