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Note 14 - Income Taxes
 12 Months Ended
Dec. 31, 2023
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)

 

2023

  

2022

  

2021

 

Current tax expense:

            

Federal

 $11,055  $9,883  $8,546 

State

  1,553   1,648   1,563 

Total current tax expense

  12,608   11,531   10,109 
             

Deferred tax expense:

            

Federal

  1,166   1,800   4,677 

State

  180   164   574 

Total deferred tax expense

  1,346   1,964   5,251 

Total income tax expense

 $13,954  $13,495  $15,360 

 

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,

 
  

2023

  

2022

  

2021

 
  

Amount

  

Percent

  

Amount

  

Percent

  

Amount

  

Percent

 

(Amounts in thousands)

                        

Federal income tax at the statutory rate

 $13,014   21.00% $12,633   21.00% $13,971   21.00%

State income tax, net of federal benefit

  1,368   2.21%  1,432   2.38%  2,076   3.12%
   14,382   23.21%  14,065   23.38%  16,047   24.12%

Increase (decrease) resulting from:

                        

Tax-exempt interest income

  (348)  (0.56)%  (347)  (0.58)%  (340)  (0.51)%

Excess tax benefits

  (25)  (0.04)%  (24)  (0.04)%  (133)  (0.20)%

Bank owned life insurance

  (167)  (0.27)%  (68)  (0.11)%  (225)  (0.34)%

Other items, net

  112   0.17%  (131)  (0.22)%  11   0.02%

Income tax at the effective tax rate

 $13,954   22.51% $13,495   22.43% $15,360   23.09%

 

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)

 

2023

  

2022

 

Deferred tax assets

        

Allowance for credit losses

 $8,523  $7,283 

Unrealized losses on available-for-sale securities

  2,958   4,153 

Unrealized asset losses

  420   503 

Purchase accounting

  —   148 

FDIC assisted transactions

  346   588 

Deferred loan fees

  4,674   2,074 

Deferred compensation assets

  6,316   5,035 

Federal net operating loss carryforward

  266   1,223 

Lease liability

  146   160 

Accrued litigation

  824   — 

Other

  831   707 

Total deferred tax assets

  25,304   21,874 
         

Deferred tax liabilities

        

Fixed assets

  (939)  (755)

Intangible assets

  (4,303)  (857)

Odd days interest deferral

  (4,134)  (4,010)

Purchase accounting

  (81)  — 

Right of use asset

  (140)  (155)

Other

  (869)  (197)

Total deferred tax liabilities

  (10,466)  (5,974)

Net deferred tax asset

 $14,838  $15,900 

 

The Company had no unrecognized tax benefits or accrued interest or penalties as of December 31, 2023 or 2022. The Company had no deferred tax valuation allowance recorded as of December 31, 2023 or 2022, 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 and its subsidiaries are subject to U.S. federal income tax of the various states.  The Company is no longer subject to examination by federal or state taxing authorities for years before 2020.

 

At December 31, 2023, the Company had Federal net operating loss carryforwards of approximately $1.27 million of which $796 thousand can be carried forward 20 years with expiration occurring no earlier than 2036, and $470 thousand that can be carried forward indefinitely.  During 2023, the Company acquired $1.46 million of Federal net operating loss carryforwards and these will be utilized during the current year. 

 

The Company has analyzed the tax positions taken, or expected to be taken in its tax returns, and concluded it has no liability related to uncertain tax positions.