Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes [Abstract]

Income Taxes

(18) Income Taxes

The provision for income tax expense consisted of the following for the years ended December 31:

	2022			2021
Current:
Federal	$	4,141		$	2,553
State		2,328			1,687
		6,469			4,240
Deferred:
Federal		(599	)		652
State		(88	)		348
		(687	)		1,000
	$	5,782		$	5,240

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, consisted of:

	2022		2021
Deferred tax assets:
Allowance for loan losses	$	4,580	$	4,317
Deferred compensation		82		91
Retirement compensation		1,635		1,559
Stock option compensation		379		311
Postretirement benefits		107		578
Current state franchise taxes		490		322
Non-accrual interest		416		291
Sale-leaseback		2		26
Lease liability		1,590		1,667
Investment securities unrealized loss		19,419		1,115
Other		392		246
Deferred tax assets		29,092		10,523
Deferred tax liabilities:
Fixed assets depreciation		1,183		1,320
FHLB dividends		184		184
Tax credit – loss on pass-through		422		400
Deferred loan costs		1,024		1,010
Mortgage servicing rights		378		288
Right of Use Asset		1,450		1,519
Other		276		147
Total deferred tax liabilities		4,917		4,868
Net deferred tax assets (see Note 7)	$	24,175	$	5,655

Based upon the level of historical taxable income and projections for future taxable income over the periods during which the deferred tax assets are deductible, management believed it is more-likely-than-not the Company will realize the benefits of these deductible differences.

At December 31, 2022, the Company had no state net operating loss carry forwards and no federal tax credit carry forwards.

A reconciliation of income taxes computed at the federal statutory rate and the provision for income taxes for the years ended December 31, is as follows:

	2022			2021
Federal statutory income tax rate		21.0	%		21.0	%
Increase (decrease) in tax rate due to:
State franchise tax, net of federal benefit		8.2	%		8.3	%
Reduction for tax exempt interest		(1.7	)%		(1.6	)%
Cash surrender value of life insurance		(1.0	)%		(0.5	)%
Other		0.2	%		(0.2	)%
Effective income tax rate		26.7	%		27.0	%

Accounting for Uncertainty in Income Taxes

The Company had no unrecognized tax benefits for the years ended December 31, 2022 and 2021.  The Company recognized no changes in unrecognized tax benefits during 2022 and 2021, due to the expiration of a statute of limitations.  The Company had no significant uncertain tax positions as of December 31, 2022 and December 31, 2021.  The Company does not currently anticipate any significant increase or decrease in unrecognized tax benefits during 2023.

The Company classifies interest and penalties as a component of the provision for income taxes. At December 31, 2022, there were no unrecognized interest and penalties. The tax years ended December 31, 2021, 2020, and 2019 remain subject to examination by the Internal Revenue Service. The tax years ended December 31, 2021, 2020, 2019, and 2018 remain subject to examination by the California Franchise Tax Board. The deductibility of these tax positions will be determined through examination by the appropriate tax authorities or the expiration of the tax statute of limitations.

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits net operating loss carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows net operating losses incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company has evaluated the impact of the CARES Act and determined that none of the changes would result in a material income tax benefit to the Company.

On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law and extends several provisions of the CARES Act. As of December 31, 2022, the Company has determined that neither this Act nor changes to income tax laws or regulations in other jurisdictions have a significant impact on our effective tax rate.