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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Taxes  
Income Taxes Text Block
NOTE 11:
 
INCOME TAXES
For the years ended December 31, 2022 and 2021 the components of income tax expense
 
from continuing operations are
presented below.
Year ended December 31
(Dollars in thousands)
2022
2021
Current income tax expense:
Federal
$
1,461
833
State
356
295
Total current income tax expense
1,817
1,128
Deferred income tax benefit:
Federal
556
220
State
130
58
Total deferred
 
income tax expense
686
278
Total income tax expense
 
$
2,503
1,406
Total income tax expense differs
 
from the amounts computed by applying the statutory federal income tax
 
rate of 21% to
earnings before income taxes.
 
A reconciliation of the differences for the years ended December 31,
 
2022 and 2021, is
presented below.
2022
2021
Percent of
Percent of
pre-tax
pre-tax
(Dollars in thousands)
Amount
earnings
Amount
earnings
Earnings before income taxes
$
12,849
9,445
Income taxes at statutory rate
2,698
21.0
%
1,983
21.0
%
Tax-exempt interest
(523)
(4.1)
(514)
(5.4)
State income taxes, net of
 
federal tax effect
346
2.7
352
3.7
New Markets Tax Credit
(356)
(2.8)
(356)
(3.8)
Bank-owned life insurance
141
1.1
(85)
(0.9)
Other
197
1.6
26
—
Total income tax expense
 
$
2,503
19.5
%
1,406
14.9
%
At December 31, 2022 and 2021, the Company had a net deferred tax asset of $13.8
 
million and $0.4 million, respectively,
included in other assets on the consolidated balance sheet.
 
The tax effects of temporary differences that
 
give rise to
significant portions of the deferred tax assets and deferred tax liabilities at December 31,
 
2022 and 2021 are presented
below.
December 31
(Dollars in thousands)
2022
2021
Deferred tax assets:
Allowance for loan losses
$
1,448
1,240
Unrealized loss on securities
13,722
—
Accrued bonus
 
228
192
Right of use liability
153
178
Other
70
77
Total deferred
 
tax assets
15,621
1,687
Deferred tax liabilities:
Premises and equipment
767
200
Unrealized gain on securities
—
298
Originated mortgage servicing rights
289
329
Right of use asset
148
173
New Markets Tax Credit investment
179
89
Other
469
163
Total deferred
 
tax liabilities
1,852
1,252
Net deferred tax asset
$
13,769
435
A valuation allowance is recognized for a deferred tax asset if, based on the weight of available
 
evidence, it is more-likely-
than-not that some portion of the entire deferred tax asset will not be realized.
 
The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income 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 strategies in making this assessment. Based upon the level of historical
 
taxable income and
projection for future taxable income over the periods which the temporary differences
 
resulting in the remaining deferred
tax assets are deductible, management believes it is more-likely-than
 
-not that the Company will realize the benefits of these
deductible differences at December 31, 2022.
 
The amount of the deferred tax assets considered realizable, however,
 
could
be reduced in the near term if estimates of future taxable income are reduced.
The change in the net deferred tax asset for the years ended December 31, 2022
 
and 2021, is presented
Year ended December 31
(Dollars in thousands)
2022
2021
Net deferred tax asset (liability):
Balance, beginning of year
$
435
(1,537)
Deferred tax expense related to continuing operations
(686)
(278)
Stockholders' equity, for accumulated
 
other comprehensive income
14,020
2,250
Balance, end of year
$
13,769
435
ASC 740,
Income Taxes,
 
defines the threshold for recognizing the benefits of tax return positions in the financial statements
as “more-likely-than-not” to be sustained by the taxing authority.
 
This section also provides guidance on the de-
recognition, measurement, and classification of income tax uncertainties in interim
 
periods.
 
As of December 31, 2022, the
Company had no unrecognized tax benefits related to federal or state income tax matters.
 
The Company does not anticipate
any material increase or decrease in unrecognized tax benefits during 2023
 
relative to any tax positions taken prior to
December 31, 2022.
 
As of December 31, 2022, the Company has accrued no interest and no penalties related to uncertain
tax positions.
 
It is the Company’s policy to recognize interest
 
and penalties related to income tax matters in income tax
expense.
 
The Company and its subsidiaries file consolidated U.S. federal and State of Alabama income
 
tax returns.
 
The Company is
currently open to audit under the statute of limitations by the Internal Revenue Service and the State of
 
Alabama for the
years ended December 31, 2019 through 2022.