Note 10 - Income Taxes

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 10: Income Taxes

Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the amounts reported in the financial statements of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Amounts for the current year are based upon estimates and assumptions as of the date of these financial statements and could vary significantly from amounts shown on the tax returns as filed. Net deferred tax assets are included with other assets in the consolidated balance sheets.

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

	At December 31,
	2021			2020
	(In thousands)
Deferred tax asset
Allowance for credit losses	$	6,852		$	6,789
State franchise taxes		2,518			2,262
Deferred compensation		4,524			4,789
Purchased assets and assumed liabilities		475			552
Post-retirement benefits		445			480
Employee benefit accruals		2,792			2,353
VISA Class B shares		348			284
Limited partnership investments		-			1,066
Impaired capital assets		2,673			2,429
Accrued liabilities		748			416
Premises and equipment		1,001			585
Lease liability		5,263			5,513
Other		103			800
Sub total deferred tax asset		27,742			28,318
Tax valuation		(1,776	)		-
Total deferred tax asset		25,966			28,318
Deferred tax liability
Net deferred loan fees		196			106
Securities available for sale		20,845			48,021
Right-of-use asset		5,263			5,513
Intangible assets		459			456
Limited partnership investments		1,704			-
Total deferred tax liability		28,467			54,096
Net deferred tax liability	$	(2,501	)	$	(25,778	)

At December 31, 2021 and December 31, 2020, the Company had $2,673 thousand and $2,429 thousand, respectively, deferred tax asset related to California capital loss carryforwards, which will expire if unutilized within five years of the year incurred. At December 31, 2021 and December 31, 2020, a valuation allowance recorded for the portion of the tax benefit that was expected to expire was $1,776 thousand and $-0-, respectively.

The provision for federal and state income taxes consists of amounts currently payable and amounts deferred as follows:

	For the Years Ended December 31,
	2021			2020			2019
	(In thousands)
Current income tax expense:
Federal	$	15,299		$	15,982		$	11,570
State		11,320			10,654			9,595
Total current		26,619			26,636			21,165
Deferred income tax expense (benefit):
Federal		1,281			(538	)		2,411
State		842			292			982
Total deferred		2,123			(246	)		3,393
Change in valuation reserve:
Federal		(472	)		-			(71	)
State		2,248			-			340
Total change in valuation reserve		1,776			-			269
Provision for income taxes	$	30,518		$	26,390		$	24,827

The provision for income taxes differs from the provision computed by applying the statutory federal income tax rate to income before taxes, as follows:

	For the Years Ended December 31,
	2021			2020			2019
	(In thousands)
Federal income taxes due at statutory rate	$	24,576		$	22,429		$	22,095
Additions (reductions) in income taxes resulting from:
Interest on state and municipal securities and loans not taxable for federal income tax purposes		(2,070	)		(2,808	)		(3,584	)
State franchise taxes, net of federal income tax benefit		9,757			8,647			8,625
Change in valuation reserve		1,776			-			269
Stock compensation deduction in excess of book expense		-			(62	)		(312	)
Tax credits		(2,621	)		(1,061	)		(1,040	)
Dividend received deduction		(48	)		(44	)		(38	)
Cash value life insurance		(389	)		(383	)		(464	)
Other		(463	)		(328	)		(724	)
Provision for income taxes	$	30,518		$	26,390		$	24,827

At December 31, 2021 and December 31, 2020, the Company had no uncertain tax positions related to previous years’ tax returns which were under examination.

The Company classifies interest and penalties as a component of the provision for income taxes. For tax years 2021 and 2020, no interest or penalties were recognized as a component of the provision for income taxes. At December 31, 2021, the tax years ended December 31, 2020, 2019 and 2018 remain subject to examination by the Internal Revenue Service and the tax years ended December 31, 2020, 2019, 2018 and 2017 remain subject to examination by the California Franchise Tax Board.