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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The composition of income tax expense for the years ended December 31, 2021, 2020, and 2019 was as follows:
(in thousands) | 2021 |  | 2020 |  | 2019
Current: |  |  |  |  |
Federal | $ | 5,351 |  |  | $ | 4,268 |  |  | $ | 3,830 |
State | 630 |  |  | — |  |  | — |
Total current | 5,981 |  |  | 4,268 |  |  | 3,830 |
Deferred: |  |  |  |  |
Federal | (284) |  |  | (1,085) |  |  | (7) |
State | — |  |  | — |  |  | — |
Total deferred | (284) |  |  | (1,085) |  |  | (7) |
Total income tax expense | $ | 5,697 |  |  | $ | 3,183 |  |  | $ | 3,823 |
Applicable income tax expense for financial reporting purposes differs from the amount computed by applying the statutory federal income tax rate for the reasons noted in the table for the years ended December 31, 2021, 2020, and 2019 are as follows:
| 2021 |  | 2020 |  | 2019
(in thousands) | Amount |  | % |  | Amount |  | % |  | Amount |  | %
Income before provision for income tax expense | $ | 28,214 |  |  |  |  | $ | 17,476 |  |  |  |  | $ | 19,937 |  |  |
Tax at statutory federal income tax rate | $ | 5,925 |  |  | 21.00 | % |  | $ | 3,670 |  |  | 21.00 | % |  | $ | 4,187 |  |  | 21.00 | %
Tax-exempt income, net | (733) |  |  | (2.60) |  |  | (487) |  |  | (2.79) |  |  | (408) |  |  | (2.04) |
State income tax, net of federal tax benefit | 498 |  |  | 1.76 |  |  | — |  |  | — |  |  | — |  |  | — |
Other, net | 7 |  |  | 0.03 |  |  | — |  |  | — |  |  | 44 |  |  | 0.22 |
Provision for income tax expense | $ | 5,697 |  |  | 20.19 | % |  | $ | 3,183 |  |  | 18.21 | % |  | $ | 3,823 |  |  | 19.18 | %
Income taxes as a percentage of earnings before income taxes as reported in the consolidated financial statements were 20.2% for the year ended December 31, 2021 compared to 18.2% and 19.2% for the years ended December 31, 2020 and 2019, respectively. The increase in the effective tax rate for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily attributable to an increase in earnings and an increase in state taxes attributed to elevated earnings. The decrease in the effective tax rate for the year ended December 31, 2020 compared to the year ended December 31, 2019 was primarily attributable to tax-free revenues having a greater impact on pre-tax income due to the reduced level of earnings in 2020. The effective tax rate for each of years ended December 31, 2021, 2020, and 2019, respectively, is lower than the U.S. federal statutory rate of 21% primarily due to tax-free revenues. Also included in the effective tax rate for the year ended December 31, 2021 is a $25,000 benefit associated with a historic tax credit investment. The investment is expected to generate a $321,000 tax benefit over the life of the project and is being recognized under the deferral method of accounting. During 2021, the Company recognized a $4.0 million current tax benefit associated with the historic tax credits, partially offset by a $3.7 million current tax expense associated with the write-off of the investment. The Company recorded deferred income in the amount of $289,000, a $7,000 deferred tax liability, and a $25,000 net tax benefit within the income tax expense. The components of deferred tax assets and deferred tax liabilities at December 31, 2021 and 2020 were as follows:
(in thousands) | 2021 |  | 2020
Deferred tax assets: |  |  |
Allowance for loan losses | $ | 2,961 |  |  | $ | 2,927 |
Pension | 262 |  |  | 1,233 |
Other real estate owned | 611 |  |  | 550 |
Deferred loan fees | 401 |  |  | 563 |
Lease liability | 386 |  |  | 449 |
Intangible assets | 20 |  |  | 22 |
Accrued / deferred compensation | 581 |  |  | 530 |
Other | 392 |  |  | 368 |
Total deferred tax assets | $ | 5,614 |  |  | $ | 6,642 |
Deferred tax liabilities: |  |  |
Premises and equipment | $ | 428 |  |  | $ | 553 |
Mortgage servicing rights | 558 |  |  | 514 |
Deferred loan costs | 327 |  |  | 288 |
Right-of-use asset | 378 |  |  | 443 |
Prepaid expenses | 409 |  |  | 359 |
Securities | 117 |  |  | 900 |
Other | 5 |  |  | 8 |
Total deferred tax liabilities | 2,222 |  |  | 3,065 |
Net deferred tax assets | $ | 3,392 |  |  | $ | 3,577 |
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income of the appropriate character during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning initiatives in making this assessment. In management's opinion, the Company will more likely than not realize the benefits of its deferred tax assets and, therefore, has not established a valuation allowance against its deferred tax assets as of December 31, 2021. Management arrived at this conclusion based upon the level of historical taxable income and projections for future taxable income of the appropriate character over the periods in which the deferred tax assets are deductible. The Company follows ASC Topic 740, Income Taxes, which addresses the accounting for uncertain tax positions. For each of the years ended December 31, 2021 and 2020, respectively, the Company did not have any uncertain tax provisions, and did not record any related tax liabilities.

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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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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