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Note 12 - Income Taxes
 12 Months Ended
Dec. 31, 2021
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 12. Income Taxes

 

The components of income tax expense for the years ended December 31, 2021 and 2020 are as follows (in thousands):

 

  

2021

  

2020

 

Federal:

        

Current

 $4,518  $4,102 

Deferred

  308   (886)

Total federal income tax expense

  4,826   3,216 

State:

        

Current

  1,509   1,366 

Deferred

  425   (201)

Total state income tax expense

  1,934   1,165 
         

Total income tax expense

 $6,760  $4,381 

 

Total income tax expense differed from the amounts computed by applying the U.S. federal income tax rate of 21% to income before income taxes for the years ended December 31, 2021 and 2020 as shown in the following table (in thousands):

 

  

2021

  

2020

 
         

Income taxes at 21%

 $6,441  $4,879 

Increase (decrease) resulting from:

        

Tax-exempt interest

  (661)  (761)

State taxes, net of federal tax benefit

  1,174   1,076 

New Markets Tax Credits

  (764)  (764)

Valuation allowance

  396   - 

Other

  174   (49)

Total income tax expense

 $6,760  $4,381 

 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2021 and 2020 are as follows (in thousands):

 

  

2021

  

2020

 
         

Deferred tax assets:

        

Allowance for loan losses

 $4,146  $4,294 

State operating and alternative minimum tax carryforward

  761   729 

Fair value adjustments from acquisitions

  116   164 

Accrued vacation

  280   272 

Off balance sheet reserve

  144   149 

Other deferred tax assets

  230   207 

Total deferred tax assets

  5,677   5,815 

Deferred tax liabilities:

        

Net unrealized gains on securities available-for-sale

  (955)  (5,341)

Goodwill and other intangible assets

  (1,135)  (1,058)

Bank premises and equipment

  (584)  (609)

Deferred loan costs

  (145)  (62)

Other deferred tax liabilities

  (314)  (250)

Total deferred tax liabilities

  (3,133)  (7,320)
         

Valuation allowance

  (622)  (226)
         

Net deferred tax asset (liability)

 $1,922  $(1,731)

 

The Company has approximately $396 thousand of state income taxes associated with state net operating loss (“NOL”) carryforwards as of December 31, 2021. In 2021, the Company has recorded a valuation allowance against the tax effect of the NOL in the amount of $396 thousand, as management believes it is more likely than not that such carryforwards will not be utilized.

 

The Company has approximately $226 thousand of state alternative minimum tax (“AMT”) credit carryforwards available to offset future state alternative minimum taxable income as of December 31, 2021 and 2020. The Company has recorded a valuation allowance against the tax effect of the AMT credit carryforwards, as management believes it is more likely than not that such carryforwards will not be utilized.

 

The Company and its subsidiaries file one income tax return in the U.S. federal jurisdiction and separate tax returns for the state of Iowa. The Company is no longer subject to U.S. federal income and state tax examinations for years before 2018.

 

The Company follows the accounting requirements for uncertain tax positions. Management has determined that the Company has no material uncertain tax positions and no material accrued interest or penalties as of or for the years ended December 31, 2021 and 2020 that would require recognition. The Company had no significant unrecognized tax benefits as of December 31, 2021, that if recognized, would affect the effective tax rate. The Company had no positions for which it deemed that it is reasonably possible that the total amounts of the unrecognized tax benefit will significantly increase or decrease within the next 12 months as of December 31, 2021 and 2020.