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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

Note 10 – Income Taxes

The components of income tax expense (benefit) for the years ended December 31 are as follows:

 

 

 

(In Thousands)

 

 

 

2021

 

 

2020

 

 

2019

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

7,536

 

 

$

6,289

 

 

$

4,005

 

State

 

 

271

 

 

 

513

 

 

 

63

 

Total current

 

 

7,807

 

 

 

6,802

 

 

 

4,068

 

Deferred:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

 

(1,746

)

 

 

(1,596

)

 

 

227

 

State

 

 

(59

)

 

 

(95

)

 

 

65

 

Total deferred

 

 

(1,805

)

 

 

(1,691

)

 

 

292

 

Total Income Tax

 

$

6,002

 

 

$

5,111

 

 

$

4,360

 

 

The following is a reconciliation of the statutory federal income tax rate to the effective tax rate:

 

 

 

(In Thousands)

 

 

 

2021

 

 

2020

 

 

2019

 

Federal income tax at statutory rates

 

$

6,194

 

 

$

5,294

 

 

$

4,780

 

(Decrease) increase resulting from:

 

 

 

 

 

 

 

 

 

 

 

 

State income tax, net of federal benefit

 

 

167

 

 

 

330

 

 

 

101

 

Tax exempt interest

 

 

(116

)

 

 

(146

)

 

 

(170

)

Section 831 deduction

 

 

(294

)

 

 

(266

)

 

 

(268

)

Other

 

 

51

 

 

 

(101

)

 

 

(83

)

Total Income Tax

 

$

6,002

 

 

$

5,111

 

 

$

4,360

 

 

Deferred tax assets and liabilities at December 31 are comprised of the following:

 

 

 

(In Thousands)

 

 

 

2021

 

 

2020

 

Deferred Tax Assets:

 

 

 

 

 

 

 

 

Allowance for loan losses

 

$

3,629

 

 

$

3,128

 

Deferred compensation

 

 

561

 

 

 

537

 

Net unrealized loss on available-for-sale securities

 

 

846

 

 

 

-

 

Fair value adjustments

 

 

1,913

 

 

 

-

 

Other

 

 

277

 

 

 

142

 

Total deferred tax assets

 

 

7,226

 

 

 

3,807

 

Deferred Tax Liabilities:

 

 

 

 

 

 

 

 

Accreted discounts on bonds

 

 

22

 

 

 

4

 

Depreciation

 

 

772

 

 

 

878

 

FHLB stock dividends

 

 

828

 

 

 

481

 

Intangible amortization

 

 

1,282

 

 

 

1,144

 

Mortgage servicing rights

 

 

778

 

 

 

725

 

Net unrealized gain on available-for-sale securities

 

 

-

 

 

 

1,514

 

Prepaids

 

 

471

 

 

 

525

 

Other

 

 

173

 

 

 

5

 

Total deferred tax liabilities

 

 

4,326

 

 

 

5,276

 

Net Deferred Tax Asset (Liability)

 

$

2,900

 

 

$

(1,469

)

 

 

As part of the Perpetual acquisition, a net operating loss (NOL) carryforward was acquired that is subject to a Section 382 limitation.  At the end of 2021, $377,807 of this NOL remained.  This will carry forward indefinitely and is expected to be used in 2022.  

 

The Corporation has additional paid-in capital that is considered restricted resulting from the acquisition of Perpetual in 2021 of approximately $2,779,000.  No deferred tax liability is required to be recorded for the Corporation’s tax bad debt reserves arising before December 31, 1987, unless it is apparent that the reserves will reverse in the near future.  Unrecognized deferred taxes on these reserves would total $584,000.  If the portion of retained earnings representing these reserves is used for any purpose other than to absorb bad debts, it will be added to future taxable income and the related tax will be recognized as expense.