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Note 14 - Income Taxes
 12 Months Ended
Dec. 31, 2021
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 14. Income Taxes 

 

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)

 

2021

  

2020

  

2019

 

Current tax expense:

            

Federal

 $8,546  $10,048  $9,603 

State

  1,563   1,643   1,554 

Total current tax expense

  10,109   11,691   11,157 
             

Deferred tax expense (benefit):

            

Federal

  4,677   (1,266)  (152)

State

  574   (239)  (11)

Total deferred tax expense (benefit)

  5,251   (1,505)  (163)

Total income tax expense

 $15,360  $10,186  $10,994 

 

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,

 
  

2021

  

2020

  

2019

 
  

Amount

  

Percent

  

Amount

  

Percent

  

Amount

  

Percent

 

(Amounts in thousands)

                        

Federal income tax at the statutory rate

 $13,971   21.00% $9,683   21.00% $10,457   21.00%

State income tax, net of federal benefit

  2,076   3.12%  1,109   3.12%  1,220   3.12%
   16,047   24.12%  10,792   24.12%  11,677   24.12%

Increase (decrease) resulting from:

                        

Tax-exempt interest income

  (340)  (0.51)%  (500)  (1.08)%  (637)  (1.28)%

Excess tax benefits

  (133)  (0.20)%  42   0.09%  (71)  (0.14)%

Bank owned life insurance

  (225)  (0.34)%  (139)  (0.30)%  (249)  (0.50)%

Other items, net

  11   0.02%  (9)  (0.74)%  274   0.04%

Income tax at the effective tax rate

 $15,360   23.09% $10,186   22.09% $10,994   22.24%

 

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)

 

2021

  

2020

 

Deferred tax assets

        

Allowance for loan losses

 $6,647  $6,128 

Unrealized asset losses

  482   545 

Purchase accounting

  455   2,559 

FDIC assisted transactions

  810   1,685 

Intangible assets

  (318)  217 

Deferred compensation assets

  4,360   4,048 

Federal net operating loss carryforward

  2,179   4,093 

Deferred loan fees

  2,350   2,401 

Other

  1,930   1,816 

Total deferred tax assets

  18,895   23,492 
         

Deferred tax liabilities

        

FDIC indemnification asset

  —   286 

Fixed assets

  (823)  2,450 

Odd days interest deferral

  (3,324)  1,482 

Unrealized gains on available for sale securities

  (4)  257 

Other

  (592)  287 

Total deferred tax liabilities

  (4,743)  4,762 

Net deferred tax asset

 $14,152  $18,730 

 

The Company had no unrecognized tax benefits or accrued interest or penalties as of December 31, 2021 or 2020. The Company had no deferred tax valuation allowance recorded as of December 31, 2021 or 2020, 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, 2018 through 2020.