Note 11 - Income Taxes

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 11. INCOME TAXES

The following table summarizes the current and deferred amounts of the provision for income tax expense (benefit) for each of the two years ended December 31, 2022 and 2021:

	For the Year Ended December 31,
(in thousands)	2022			2021
Current	$	4,646		$	4,250
Deferred		(502	)		406
Income tax expense	$	4,144		$	4,656

The following table presents a reconciliation between the effective income tax expense and the income tax expense that would have been provided at the federal statutory tax rate of 21.0% for the years ended  December 31, 2022 and  December 31, 2021:

	For the Year Ended December 31,
	2022						2021
(dollars in thousands)	Amount			%			Amount			%
Provision at statutory tax rates	$	5,164			21.00	%	$	5,466			21.00	%
Add (deduct):
Tax effects of tax free interest income		(874	)		(3.55	)%		(733	)		(2.82	)%
Non-deductible interest expense		85			0.35	%		32			0.12	%
Bank-owned life insurance		(206	)		(0.84	)%		(114	)		(0.44	)%
Other items, net		(25	)		(0.11	)%		5			0.03	%
Income tax provision	$	4,144			16.85	%	$	4,656			17.89	%

The following table summarizes the components of net deferred tax assets at December 31, 2022 and 2021: 

	December 31,
(in thousands)	2022			2021
Allowance for loan and lease losses	$	3,180		$	2,730
Deferred compensation		650			697
Lease liability		736			659
Other real estate owned valuation		72			9
Employee benefits		352			340
Accrued interest		7			2
Charitable contribution carryover		-			19
Accrued vacation		-			54
Deferred income		29			47
Unrealized holding losses on securities available-for-sale		12,982			-
Unrealized holding losses on equity securities		32			-
Gross deferred tax assets		18,040			4,557
Deferred loan origination costs		(137	)		(114	)
Unrealized holding gains on securities available-for-sale		-			(1,631	)
Unrealized holding gains on equity securities		-			(147	)
Right of use asset		(677	)		(597	)
Prepaid expenses		-			(27	)
Derivative assets		(215	)		(58	)
Mortgage servicing rights		(53	)		(56	)
Depreciation		(130	)		(122	)
Gross deferred tax liabilities		(1,213	)		(2,752	)
Net deferred tax assets	$	16,827		$	1,805

Management evaluates the carrying amount of its deferred tax assets on a quarterly basis, or more frequently if necessary, in accordance with guidance set forth in ASC Topic 740 “Income Taxes,” and applies the criteria in the guidance to determine whether it is more likely than not that some portion, or all, of the deferred tax asset will not be realized within its life cycle, based on the weight of available evidence. Management performed an evaluation of FNCB's deferred tax assets at December 31, 2022 taking into consideration all available positive and negative evidence at that time. Based on this evaluation, management believes that FNCB's future taxable income will be sufficient to utilize its deferred tax assets. There was no valuation allowance for deferred tax assets at December 31, 2022 and December 31, 2021.