NOTE 13 – NET DEFERRED TAX ASSET AND INCOME TAXES

12 Months Ended

Dec. 31, 2022

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)		2022			2021		2020
Federal	$	3,364		$	3,340	$	3,487
State		338			538		566
Current provision		3,702			3,878		4,053
Federal		(140	)		327		(1,335	)
State		(23	)		62		(265	)
Deferred (benefit) expense		(163	)		389		(1,600	)
Income tax provision	$	3,539		$	4,267	$	2,453

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

Years ended December 31, (in thousands)	2022		2021		2020
Income tax at statutory federal tax rate	21.00	%	21.00	%	21.00	%
State tax, net of federal tax benefit	1.28		2.30		1.97
Tax exempt income and dividends received deduction	(3.01	)	(2.52	)	(3.69	)
BOLI interest and gain	(0.87	)	(0.56	)	(1.60	)
Other	(0.17	)	0.35		(0.64	)
Effective income tax rates	18.23	%	20.57	%	17.04	%

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

December 31, (in thousands)		2022			2021
Allowance for loan losses	$	3,633		$	3,170
Interest on non-performing loans		99			157
Accrued deferred compensation		472			488
Post-retirement benefits		8			11
Deferred loan costs, net		—			17
Other real estate owned write-downs		—			4
Restricted stock awards		390			361
Net unrealized holding losses on available-for-sale securities		5,509			—
Write-down of securities		33			—
Mark-to-market adjustments of securities		31			—
Other		118			183
Gross deferred tax assets		10,293			4,391
Deferred loan fees, net		(242	)		(69	)
Goodwill and core deposit intangible asset		(644	)		(615	)
Accelerated depreciation		(763	)		(681	)
Prepaid expenses		—			(32	)
Gain on disposal		—			(5	)
Mortgage servicing rights		(152	)		(169	)
Net unrealized holding gains on available-for-sale securities		—			(232	)
Gross deferred tax liabilities		(1,801	)		(1,803	)
Net deferred tax asset	$	8,492		$	2,588

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, 2022, and 2021, 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, 2019 through December 31, 2022.