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Note 11 - Income Taxes | 12 Months Ended
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Dec. 31, 2021
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | Note 11 – Income Taxes Information as of December 31 and for the year follows:
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Provision for Income Taxes |  |  |  |  |  |  |  |  |  |  |  |
Current federal income tax expense |  | $ | 3,532 |  |  | $ | 3,070 |  |  | $ | 984 |
Deferred federal income tax expense/(benefit) |  |  | 924 |  |  |  | 202 |  |  |  | 310 |
Income tax expense |  | $ | 4,456 |  |  | $ | 3,272 |  |  | $ | 1,294 |
Reconciliation of Income Tax Provision to Statutory Rate |  |  |  |  |  |  |  |  |  |  |  |
Income tax computed at statutory federal rate of 21% |  | $ | 5,565 |  |  | $ | 3,966 |  |  | $ | 1,778 |
Tax exempt interest income |  |  | (1,190 | ) |  |  | (574 | ) |  |  | (320 | )
Tax exempt earnings on bank-owned life insurance |  |  | (170 | ) |  |  | (162 | ) |  |  | (162 | )
Tax credits |  |  | (284 | ) |  |  | (240 | ) |  |  | (218 | )
Nondeductible merger expenses |  |  | - |  |  |  | 182 |  |  |  | 164 |
Disallowed interest expense |  |  | 74 |  |  |  | 64 |  |  |  | 13 |
Other items |  |  | 461 |  |  |  | 36 |  |  |  | 39 |
Income tax expense |  | $ | 4,456 |  |  | $ | 3,272 |  |  | $ | 1,294 |
Effective income tax rate |  |  | 17 | % |  |  | 17 | % |  |  | 15 | %
(Dollars in thousands) |  |  |  |  |  |  |  |
Components of Deferred Tax Assets and Liabilities |  | 2021 |  |  | 2020 |
Deferred tax assets: |  |  |  |  |  |  |  |
Purchase accounting adjustments from mergers with County |  |  |  |  |  |  |  |
and Community Shores |  | $ | 1,374 |  |  | $ | 1,953 |
Allowance for loan losses |  |  | 1,614 |  |  |  | 1,595 |
Unrealized losses on securities available for sale |  |  | 685 |  |  |  | - |
Net operating loss carryforward |  |  | 544 |  |  |  | 851 |
Deferred loan fees |  |  | 319 |  |  |  | 466 |
Write-downs of other real estate owned |  |  | - |  |  |  | 326 |
Other |  |  | 354 |  |  |  | 380 |
Total deferred tax assets |  |  | 4,890 |  |  |  | 5,571 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Unrealized gains on securities available for sale |  |  | - |  |  |  | 2,931 |
Purchase accounting adjustments from mergers with County |  |  |  |  |  |  |  |
and Community Shores |  |  | 1,107 |  |  |  | 1,403 |
Loan servicing rights |  |  | 980 |  |  |  | 833 |
Depreciation |  |  | 540 |  |  |  | 653 |
Interest rate lock commitments |  |  | - |  |  |  | 177 |
Other |  |  | 323 |  |  |  | 230 |
Total deferred tax liabilities |  |  | 2,950 |  |  |  | 6,227 |
Net deferred tax asset (liability) |  | $ | 1,940 |  |  | $ | (656 | )
As of December 31, 2021, deferred tax assets included federal net operating loss carryforwards of approximately $2.6 million which was acquired through the merger with Community Shores. The loss carryforwards expire at various dates from 2031 to 2035. Deferred tax assets are recognized for net operating losses because the benefit is more likely than not to be realized. Under Code Section 382, ChoiceOne is limited to applying approximately $185,000 of net operating losses per year.

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