Income Taxes

12 Months Ended

Dec. 31, 2022

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
2022:
Federal	$1,412	$1,412	$2,824
State	860	698	1,558
Amortization of investment in low income housing tax credit partnerships	3,371	—	3,371
Total	$5,643	$2,110	$7,753
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

    The actual expense for 2022, 2021, and 2020, differs from the “expected” tax expense (computed by applying the U.S. Federal Statutory Tax Rate of 21% for the years ended December 31, 2022, 2021 and 2020) as follows: 

(In  Thousands)	2022	2021	2020
Computed “expected” income tax expense	$8,084	$10,079	$8,914
State income taxes, net	1,231	2,175	1,639
Tax-exempt interest on investment securities and loans	(358)	(238)	(256)
Amortization of investment in low income housing tax credit partnerships, net	3,191	3,163	2,712
Low income housing credits	(3,725)	(3,694)	(3,168)
Other	(670)	(1,009)	(282)
Total	$7,753	$10,476	$9,559

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

(In  Thousands)	2022	2021	2020
Deferred Tax Asset:
Allowance for loan losses	$4,263	$3,126	$5,772
Loan fees, net of costs	778	1,956	(635)
Interest income, nonaccrual loans	370	482	419
Deferred compensation	1,822	1,344	1,130
Equity compensation	404	406	481
Operating lease liabilities	2,805	3,117	3,519
Accrued liabilities	1,286	1,826	1,391
Unrealized loss on available for sale investment securities	11,976	1,270	54
Unrealized loss on marketable equity securities	178	—	—
Other	285	837	1,258
Total Deferred Tax Asset	$24,167	$14,364	$13,389
Deferred Tax Liability:
Intangible amortization	($1,886)	($1,453)	($1,022)
Mortgage servicing rights	(5,789)	(4,172)	(3,530)
Depreciation and amortization	(1,261)	(1,515)	(2,066)
Operating lease right-of-use assets	(2,806)	(3,128)	(3,537)
Unrealized gain on available for sale investment securities	(11)	(189)	(554)
Unrealized gain on marketable equity securities	(18)	(159)	(187)
Other	(1,029)	(470)	(513)
Total Deferred Tax Liability	($12,800)	($11,086)	($11,409)
Net Deferred Tax Asset	$11,367	$3,278	$1,980

    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, 2022, 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.

The tax years subject to examination by federal taxing authorities are the years ending December 31, 2022, 2021, 2020, and 2019. The tax years subject to examination by the State of Alaska are the years ending December 31, 2022, 2021, 2020, 2019, 2018 and 2017.