Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

    Components of the provision for income taxes are as follows: 

(In Thousands)	Current Tax Expense (Benefit)	Deferred Expense (Benefit)	Total Expense
2021:
Federal	$5,090	($869)	$4,221
State	3,182	(429)	2,753
Amortization of investment in low income housing tax credit partnerships	3,502	—	3,502
Total	$11,774	($1,298)	$10,476
2020:
Federal	$3,607	$371	$3,978
State	1,891	184	2,075
Amortization of investment in low income housing tax credit partnerships	3,506	—	3,506
Total	$9,004	$555	$9,559
2019:
Federal	$1,078	$476	$1,554
State	977	235	1,212
Amortization of investment in low income housing tax credit partnerships	2,668	—	2,668
Total	$4,723	$711	$5,434

    The actual expense for 2021, 2020, and 2019, differs from the “expected” tax expense (computed by applying the U.S. Federal Statutory Tax Rate of 21% for the years ended December 31, 2021, 2020 and 2019) as follows: 

(In  Thousands)	2021	2020	2019
Computed “expected” income tax expense	$10,079	$8,914	$5,486
State income taxes, net	2,175	1,639	957
Tax-exempt interest on investment securities and loans	(238)	(256)	(300)
Amortization of investment in low income housing tax credit partnerships, net	3,163	2,712	2,316
Low income housing credits	(3,694)	(3,168)	(2,721)
Other	(1,009)	(282)	(304)
Total	$10,476	$9,559	$5,434

    The components of the net deferred tax asset are as follows:

(In  Thousands)	2021	2020	2019
Deferred Tax Asset:
Allowance for loan losses	$3,126	$5,772	$5,190
Loan fees, net of costs	1,956	(635)	741
Interest income, nonaccrual loans	482	419	609
Deferred compensation	1,344	1,130	1,224
Equity compensation	406	481	429
Operating lease liabilities	3,117	3,519	4,045
Accrued liabilities	1,826	1,391	1,173
Unrealized gain on available for sale investment securities	1,270	54	27
Other	837	1,258	537
Total Deferred Tax Asset	$14,364	$13,389	$13,975
Deferred Tax Liability:
Intangible amortization	($1,453)	($1,022)	($587)
Mortgage servicing rights	(4,172)	(3,530)	(3,767)
Depreciation and amortization	(1,515)	(2,066)	(1,848)
Operating lease right-of-use assets	(3,128)	(3,537)	(4,067)
Unrealized loss on available for sale investment securities	(189)	(554)	(411)
Unrealized loss on marketable equity securities, net	(159)	(187)	(169)
Other	(470)	(513)	(591)
Total Deferred Tax Liability	($11,086)	($11,409)	($11,440)
Net Deferred Tax Asset	$3,278	$1,980	$2,535

    A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized.  The primary source of recovery of the deferred tax asset will be future taxable income.  Management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax asset.  The deferred tax asset is included in "Other assets" in the Consolidated Balance Sheets.

    As of December 31, 2021, the Company had no unrecognized tax benefits. In 2020 the Company reversed an accrual of $454,000 for a potential increase in tax expense that was recorded in 2019 related to an audit that was performed in 2018 by the State of Alaska for tax years 2014-2016. The Company appealed the initial audit decision and the appeal was ruled in the Company's favor in the first quarter of 2021. In 2019 the Company reversed an accrual of $250,000 related to interest and penalties that was recognized in 2018.

The tax years subject to examination by federal taxing authorities are the years ending December 31, 2021, 2020, 2019, and 2018. The tax years subject to examination by the State of Alaska are the years ending December 31, 2021, 2020, 2019, 2018, 2017 and 2016.