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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes

Note 17. Income Taxes

 

The following table presents the differences between the provision for income taxes at the federal statutory rate and the amounts computed as reported for the periods stated.

 

 

 

For the years ended December 31,

 

(Dollars in thousands)

 

2022

 

 

2021

 

 

2020

 

Income tax at federal statutory rate

 

$

7,612

 

 

 

21.0

%

 

$

14,317

 

 

 

21.0

%

 

$

4,725

 

 

 

21.0

%

Increase (decrease) resulting from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     State income taxes, net of federal tax effect

 

 

625

 

 

 

1.7

%

 

 

1,499

 

 

 

2.2

%

 

 

34

 

 

 

0.2

%

     Tax-exempt interest income

 

 

(121

)

 

 

(0.3

%)

 

 

(105

)

 

 

(0.2

%)

 

 

(20

)

 

 

(0.1

%)

     Income from life insurance

 

 

(283

)

 

 

(0.8

%)

 

 

(196

)

 

 

(0.3

%)

 

 

(82

)

 

 

(0.4

%)

     Merger-related expenses

 

 

—

 

 

 

—

 

 

 

250

 

 

 

0.4

%

 

 

174

 

 

 

0.8

%

     Other permanent differences

 

 

500

 

 

 

1.4

%

 

 

(64

)

 

 

(0.1

%)

 

 

(31

)

 

 

(0.1

%)

     Provision for income taxes

 

$

8,333

 

 

 

23.0

%

 

$

15,701

 

 

 

23.0

%

 

$

4,800

 

 

 

21.4

%

 

The following table presents the significant components of the provision for income taxes as of the dates stated.

 

 

 

For the years ended December 31,

 

(Dollars in thousands)

 

2022

 

 

2021

 

 

2020

 

Current tax provision

 

 

 

 

 

 

 

 

 

     Federal

 

$

4,762

 

 

$

12,832

 

 

$

6,437

 

     State

 

 

546

 

 

 

946

 

 

 

43

 

          Total current tax provision

 

 

5,308

 

 

 

13,778

 

 

 

6,480

 

Deferred tax provision (benefit)

 

 

 

 

 

 

 

 

 

     Federal

 

 

3,046

 

 

 

971

 

 

 

(1,680

)

     State

 

 

(21

)

 

 

952

 

 

 

—

 

          Total deferred tax provision (benefit)

 

 

3,025

 

 

 

1,923

 

 

 

(1,680

)

Provision for income taxes

 

$

8,333

 

 

$

15,701

 

 

$

4,800

 

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table presents significant components of deferred tax assets and liabilities as of the dates stated.

 

 

 

December 31,

 

(Dollars in thousands)

 

2022

 

 

2021

 

Deferred tax assets relating to:

 

 

 

 

 

 

     Allowance for loan losses

 

$

5,126

 

 

$

2,470

 

     Compensation differences

 

 

1,340

 

 

 

1,221

 

     Reserve for loan sale buy backs

 

 

640

 

 

 

227

 

     Acquisition accounting adjustments

 

 

1,522

 

 

 

3,463

 

     Loan origination costs

 

 

160

 

 

 

67

 

     Pass-through entities

 

 

114

 

 

 

487

 

     Unrealized losses on securities available for sale

 

 

13,149

 

 

 

1,092

 

     Other

 

 

555

 

 

 

872

 

          Total deferred tax assets

 

 

22,606

 

 

 

9,899

 

Deferred tax liabilities relating to:

 

 

 

 

 

 

     Premises and equipment, net

 

 

(2,191

)

 

 

(2,885

)

     Core deposit and customer-based intangible assets

 

 

(1,179

)

 

 

(1,549

)

     Mortgage servicing rights

 

 

(6,478

)

 

 

(3,711

)

     Unrealized gains on other investments

 

 

(3,491

)

 

 

(1,536

)

     Other

 

 

(85

)

 

 

(68

)

          Total deferred tax liabilities

 

 

(13,424

)

 

 

(9,749

)

Deferred tax asset, net

 

$

9,182

 

 

$

150

 

 

Deferred income tax assets and liabilities are measured at the enacted tax rate for the period in which they are expected to reverse; therefore, as of December 31, 2022, they have been measured using the federal income tax rate enacted for subsequent years of 21% and applicable state income tax rates.

 

As of December 31, 2022 and 2021, the Company had no net operating losses to be carried forward and applied against future taxable income. The Company’s policy is to report interest and penalties, if any, related to uncertain tax positions in income tax expense in the consolidated statements of income. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2018. As of December 31, 2022 and 2021, the Company has no uncertain tax positions.

 

The Company’s deferred tax asset was $22.6 million and $9.9 million at December 31, 2022 and 2021, respectively. As of December 31, 2022, management concluded that the Company’s deferred tax assets were fully realizable, and accordingly, no valuation allowance was recorded. The Company will continue to monitor deferred tax assets to evaluate whether it will be able to realize the full benefit of the deferred tax asset or whether there is need for a valuation allowance. Significant negative trends in asset credit quality, losses from operations, or other factors could impact the realization of the deferred tax asset in the future.