NOTE 13 – NET DEFERRED TAX ASSET AND INCOME TAXES

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

NOTE 13 – NET DEFERRED TAX ASSET AND INCOME TAXES

NOTE 13 – NET DEFERRED TAX ASSET AND INCOME TAXES

Salisbury provides deferred taxes for the estimated future tax effects attributable to temporary differences and carry-forwards when realization is more likely than not. The components of the income tax provision were as follows:

Years ended December 31, (in thousands)		2021		2020			2019
Federal	$	3,340	$	3,487		$	2,406
State		538		566			344
Current provision		3,878		4,053			2,750
Federal		327		(1,335	)		(317	)
State		62		(265	)		(74	)
Deferred expense (benefit)		389		(1,600	)		(391	)
Income tax provision	$	4,267	$	2,453		$	2,359

The following is a reconciliation of the expected federal statutory tax to the income tax provision:

Years ended December 31, (in thousands)	2021		2020		2019
Income tax at statutory federal tax rate	21.00	%	21.00	%	21.00	%
State tax, net of federal tax benefit	2.30		1.97		1.58
Tax exempt income and dividends received deduction	(2.52	)	(3.69	)	(3.82	)
BOLI interest and gain	(0.56	)	(1.60	)	(0.61	)
Other	0.35		(0.64	)	(0.67	)
Effective income tax rates	20.57	%	17.04	%	17.48	%

The components of Salisbury's net deferred tax assets are as follows:

December 31, (in thousands)		2021			2020
Allowance for loan losses	$	3,170		$	3,355
Interest on non-performing loans		157			214
Accrued deferred compensation		488			517
Post-retirement benefits		11			11
Mark-to-market purchase accounting adjustments		17			—
Loss on equity securities		4			—
Restricted stock awards		361			196
Deferred loan costs, net		—			90
Other		183			98
Gross deferred tax assets		4,391			4,481
Deferred loan fees, net		(69	)		—
Mark-to-market purchase accounting adjustments		—			(8	)
Goodwill and core deposit intangible asset		(615	)		(590	)
Accelerated depreciation		(681	)		(522	)
Gain on equity securities		—			(2	)
Prepaid expenses		(32	)		—
Gain on disposal		(5	)		—
Mortgage servicing rights		(169	)		(150	)
Net unrealized holding gains on available-for-sale securities		(232	)		(797	)
Gross deferred tax liabilities		(1,803	)		(2,069	)
Net deferred tax asset	$	2,588		$	2,412

Salisbury will only recognize a deferred tax asset when, based upon available evidence, realization is more likely than not. In accordance with Connecticut legislation, in 2004, Salisbury formed a PIC, SBT Mortgage Service Corporation. Salisbury does not expect to pay Connecticut state income tax in the foreseeable future unless there is a change in Connecticut law.

Salisbury’s policy is to provide for uncertain tax positions and the related interest and penalties (recorded as a component of income tax expense, if any) based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. As of December 31, 2021, and 2020, there were no material uncertain tax positions related to federal and state tax matters. Salisbury is currently open to audit under the statute of limitations by the Internal Revenue Service and state taxing authorities for the years ended December 31, 2018 through December 31, 2021.