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Note 11 - Income Taxes
 12 Months Ended
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.