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Note 12 - Income Taxes | 12 Months Ended
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Dec. 31, 2023
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | NOTE 12 - INCOME TAXES The asset and liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Income tax expense consists of the following:
(dollars in thousands) |  | 2023 |  |  | 2022 |  |  | 2021 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 10,804 |  |  | $ | 18,315 |  |  | $ | 16,037 |
State |  |  | 6,761 |  |  |  | 10,952 |  |  |  | 9,087 |
Total Current |  |  | 17,565 |  |  |  | 29,267 |  |  |  | 25,124 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (288 | ) |  |  | (1,756 | ) |  |  | (1,148 | )
State |  |  | 504 |  |  |  | (493 | ) |  |  | 55 |
Total Deferred |  |  | 216 |  |  |  | (2,249 | ) |  |  | (1,093 | )
Total income tax expense |  | $ | 17,781 |  |  | $ | 27,018 |  |  | $ | 24,031 |
A comparison of the federal statutory income tax rates to the Company's effective income tax rates for the years ended December 31 follows:
|  | 2023 |  |  | 2022 |  |  | 2021 |
(dollars in thousands) |  | Amount |  |  | Rate |  |  | Amount |  |  | Rate |  |  | Amount |  |  | Rate |
Statutory federal tax |  | $ | 12,652 |  |  | 21.0 | % |  | $ | 19,182 |  |  |  | 21.0 | % |  | $ | 16,997 |  |  |  | 21.0 | %
State tax, net of federal benefit |  |  | 5,181 |  |  | 8.6 | % |  |  | 8,278 |  |  |  | 9.1 | % |  |  | 7,182 |  |  |  | 8.9 | %
Tax-exempt income |  |  | (399 | ) |  | (0.7 | )% |  |  | (355 | ) |  |  | (0.4 | )% |  |  | (285 | ) |  |  | (0.4 | )%
Stock-based compensation |  |  | 54 |  |  | 0.1 | % |  |  | (396 | ) |  |  | (0.4 | )% |  |  | (404 | ) |  |  | (0.5 | )%
Other items, net |  |  | 293 |  |  | 0.5 | % |  |  | 309 |  |  |  | 0.3 | % |  |  | 541 |  |  |  | 0.7 | %
Total income tax expense |  | $ | 17,781 |  |  |  | 29.5 | % |  | $ | 27,018 |  |  |  | 29.6 | % |  | $ | 24,031 |  |  |  | 29.7 | %
Deferred taxes are a result of differences between income tax accounting and generally accepted accounting principles with respect to income and expense recognition. The following is a summary of the components of the net deferred tax asset accounts recognized in the accompanying balance sheets as of December 31:
(dollars in thousands) |  | 2023 |  |  | 2022 |
Deferred tax assets: |  |  |  |  |  |  |  |
Allowance for credit losses |  | $ | 13,011 |  |  | $ | 12,834 |
Stock-based compensation |  |  | 472 |  |  |  | 546 |
Operating loss carryforwards |  |  | 32 |  |  |  | 154 |
Unrealized loss on AFS securities |  |  | 8,597 |  |  |  | 9,614 |
Lease liability |  |  | 9,539 |  |  |  | 8,149 |
State tax |  |  | 1,444 |  |  |  | 2,426 |
Other |  |  | 1,237 |  |  |  | 917 |
|  |  | 34,332 |  |  |  | 34,640 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation |  |  | (1,389 | ) |  |  | (1,598 | )
Deferred loan costs |  |  | (3,123 | ) |  |  | (2,808 | )
Acquisition accounting fair value adjustments |  |  | (2,794 | ) |  |  | (3,052 | )
Mortgage servicing rights |  |  | (1,991 | ) |  |  | (2,259 | )
Right of use asset |  |  | (9,115 | ) |  |  | (7,818 | )
Other |  |  | (155 | ) |  |  | (128 | )
|  |  | (18,567 | ) |  |  | (17,663 | )
Net deferred tax assets |  | $ | 15,765 |  |  | $ | 16,977 |
At December 31, 2023, the Company has usable net operating loss carryforwards from acquisitions of $21,104 for federal and $5,570 for California income tax purposes. Net operating loss carry forwards, to the extent not used, will begin to expire in 2028. The net operating loss carryforwards were generated through acquisitions, and as a result, are substantially limited by Section 382 of the Internal Revenue Code. Benefits not expected to be realized due to the limitation have been excluded from the deferred tax asset and net operating loss carryforward amounts noted above. Based on management's assessment, the Company concluded that no valuation allowance was necessary for the Company's deferred tax assets as of December 31, 2023. The Company files income tax returns in federal and various state jurisdictions. The Company is subject to examinations in federal jurisdiction for the years ended after December 31, 2019. The statutes of limitations for state income tax returns remain open for tax years in accordance with each state's statutes. The audit of the Company's New York State tax returns for the tax period from January 1, 2018 to December 31, 2020 was completed in August 2023. The Company paid additional tax and interest of $70,000 without penalties to settle the tax audit findings with New York State. The Company had no material uncertain tax positions at December 31, 2023 and 2022, and recognized no material interest or penalties as part of income taxes for the years ended December 31, 2023, 2022, and 2021.

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