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INCOME TAXES

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

INCOME TAXES

14. INCOME TAXES

The net deferred tax asset at December 31, 2021 and 2020 represents the following temporary difference components:

​

​	​	​	​	​	​	​
​		December 31,		​	December 31,
(In Thousands)		2021			2020
Deferred tax assets:	​	​	​	​	​	​
Allowance for loan losses	​	$	2,935	​	$	2,154
Purchase accounting adjustments on loans	​		1,621	​		1,930
Net operating loss carryforward	​	​	778	​	​	896
Operating leases liability	​	​	821	​	​	724
Other deferred tax assets	​		3,260	​		3,089
Total deferred tax assets	​		9,415	​		8,793
​	​	​	​	​	​	​
Deferred tax liabilities:	​			​
Unrealized holding gains on securities	​		1,278	​		3,104
Defined benefit plans - ASC 835	​		57	​		32
Bank premises and equipment	​		460	​		1,216
Core deposit intangibles	​		725	​		840
Right-of-use assets from operating leases	​	​	821	​	​	724
Other deferred tax liabilities	​		187	​		172
Total deferred tax liabilities	​		3,528	​		6,088
Deferred tax asset, net	​	$	5,887	​	$	2,705

​

​

The provision for income taxes includes the following:

​

​	​	​	​	​	​	​
(In Thousands)		2021			2020
Currently payable	​	$	8,386	​	$	4,230
Tax expense resulting from allocations of certain tax benefits to equity or as a reduction in other assets		​	128		​	121
Deferred		​	(1,381)		​	(361)
Total provision	​	$	7,133	​	$	3,990

​

A reconciliation of income tax at the statutory rate to the Corporation’s effective rate is as follows:

​

​	​	​	​	​	​	​	​	​	​	​
​		2021				​	2020
(Dollars In Thousands)		Amount			%		Amount			%
Expected provision	​	$	7,914		21.0	​	$	4,875		21.0
Tax-exempt interest income	​		(921)		(2.4)	​		(808)		(3.5)
Increase in cash surrender value and other income from life insurance, net	​		(118)		(0.3)	​		(170)		(0.7)
ESOP dividends	​		(120)		(0.3)	​		(110)		(0.5)
State income tax, net of Federal benefit	​		375		1.0	​		172		0.7
Other, net	​		3		0.0	​		31		0.1
Effective income tax provision	​	$	7,133		18.9	​	$	3,990		17.2

​

In connection with the 2020 Covenant merger, the Corporation received a net operating loss (“NOL”) available to be carried forward against future federal taxable income of $4.6 million. Availability of the NOL does not expire; however, the amount that may be offset against taxable income is limited to approximately $563,000 per year and further limited annually to no more than 80% of taxable income without regard to the NOL. At December 31, 2021, the unused amount of the NOL is $3.7 million.

The Corporation has no unrecognized tax benefits, nor pending examination issues related to tax positions taken in preparation of its income tax returns. With limited exceptions, the Corporation is no longer subject to examination by the Internal Revenue Service for years prior to 2018.

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- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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