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Income Taxes
 12 Months Ended
Dec. 31, 2022
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)

 

 

 

2022

 

 

2021

 

 

2020

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

7,430

 

 

$

7,536

 

 

$

6,289

 

State

 

 

359

 

 

 

271

 

 

 

513

 

Total current

 

 

7,789

 

 

 

7,807

 

 

 

6,802

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

227

 

 

 

(1,746

)

 

 

(1,596

)

State

 

 

(56

)

 

 

(59

)

 

 

(95

)

Total deferred

 

 

171

 

 

 

(1,805

)

 

 

(1,691

)

Total Income Tax

 

$

7,960

 

 

$

6,002

 

 

$

5,111

 

 

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

 

 

 

(In Thousands)

 

 

 

2022

 

 

2021

 

 

2020

 

Federal income tax at statutory rates

 

$

8,489

 

 

$

6,194

 

 

$

5,294

 

(Decrease) increase resulting from:

 

 

 

 

 

 

 

 

 

State income tax, net of federal benefit

 

 

239

 

 

 

167

 

 

 

330

 

Tax exempt interest

 

 

(133

)

 

 

(116

)

 

 

(146

)

Section 831 deduction

 

 

(270

)

 

 

(294

)

 

 

(266

)

Other

 

 

(365

)

 

 

51

 

 

 

(101

)

Total Income Tax

 

$

7,960

 

 

$

6,002

 

 

$

5,111

 

 

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

 

 

 

(In Thousands)

 

 

 

2022

 

 

2021

 

Deferred Tax Assets:

 

 

 

 

 

 

Allowance for loan losses

 

$

4,623

 

 

$

3,629

 

Deferred compensation

 

 

570

 

 

 

561

 

Net unrealized loss on available-for-sale securities

 

 

10,163

 

 

 

846

 

Fair value adjustments

 

 

2,152

 

 

 

1,913

 

Other

 

 

554

 

 

 

277

 

Total deferred tax assets

 

 

18,062

 

 

 

7,226

 

Deferred Tax Liabilities:

 

 

 

 

 

 

Accreted discounts on bonds

 

 

54

 

 

 

22

 

Depreciation

 

 

1,083

 

 

 

772

 

FHLB stock dividends

 

 

1,011

 

 

 

828

 

Intangible amortization

 

 

2,640

 

 

 

1,282

 

Mortgage servicing rights

 

 

787

 

 

 

778

 

Prepaids

 

 

500

 

 

 

471

 

Other

 

 

424

 

 

 

173

 

Total deferred tax liabilities

 

 

6,499

 

 

 

4,326

 

Net Deferred Tax Asset (Liability)

 

$

11,563

 

 

$

2,900

 

 

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 NOL was used in 2022 and no balance remains. The Peoples Federal Savings and Loan acquisition included a NOL of $2,789,124. At the end of 2022, $2,638,002 of this NOL remained.

 

The Corporation has additional paid-in capital that is considered restricted resulting from the acquisition of Perpetual in 2021 of approximately $2,779,000 and from the acquisition of Peoples in 2022 of approximately $2,174,000. 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 $1,040,000. 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.