Note 11 - Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 11 - Income Taxes

The components of the provision for income taxes are as follows:

Year ended December 31,	2023			2022			2021
Current Federal income taxes	$	2,109		$	3,543		$	3,629
Current state income taxes		83			180			219
Deferred Federal income taxes (benefits)		71			36			21
Deferred state income taxes (benefits)		(15	)		(102	)		92
Valuation adjustment		(4	)		8			—
Net provision	$	2,244		$	3,665		$	3,961

At December 31, 2023 and 2022, the tax effects of temporary differences that represent the significant portion of deferred tax assets and liabilities are as follows:

December 31,	2023		2022
Deferred tax assets
Allowance for credit losses on loans	$	1,859	$	2,212
Net unrealized holding losses on investment    securities available-for-sale		17,692		21,565
Net unrealized holding losses on investment    rate swaps		367		—
Fair value adjustment on equity securities		—		10
Non-accrual interest income		170		52
Leasing liability		637		678
Deferred revenue		—		7
Incurred but not reported medical expense		27		28
Bonus		88		128
State net operating loss carryforward		30		—
Other		61		48
Total deferred tax assets		20,931		24,728
Deferred tax liabilities
Deferred loan income		487		459
Depreciation		215		225
Mortgage servicing rights		87		98
Fair value remeasurements on interest rate swap		12		—
Fair value adjustment on equity securities		61		—
Prepaid expenses		203		232
Right of use asset		572		611
Other		—		18
Total deferred tax liabilities		1,637		1,643
Valuation allowance		4		8
Net deferred tax asset	$	19,290	$	23,077

The ability to realize deferred tax assets is dependent upon a variety of factors, including the generation of future taxable income, the existence of taxes paid and recoverable, the reversal of deferred tax liabilities and tax planning strategies. Based upon these and other factors, management believes it is more likely than not that QNB will realize the benefits of the above deferred tax assets except an $4,000 deferred tax asset related to non-qualified stock option that it is more likely than not that the options will expire unexercised due to the strike price. A valuation allowance was recorded for this amount.

A reconciliation of the tax provision on income before taxes computed at the statutory rates of 21% for 2023, 2022 and 2021 and the actual tax provision was as follows:

Year ended December 31,	2023						2022						2021
	Dollar			%			Dollar			%			Dollar			%
Provision at statutory rate	$	2,463			21.0	%	$	4,113			21.0	%	$	4,295			21.0	%
Tax-exempt interest and dividend income		(267	)		(2.3	)		(504	)		(2.6	)		(527	)		(2.6	)
Bank-owned life insurance		(67	)		(0.6	)		(75	)		(0.4	)		(104	)		(0.5	)
Stock-based compensation expense		26			0.2			20			0.1			19			0.1
State income tax		53			0.5			62			0.3			245			1.2
Other		40			0.3			41			0.2			33			0.2
Income tax provision		2,248			19.2			3,657			18.7			3,961			19.4
Valuation Adjustment		(4	)		(0.1	)		8			0.0			—			—
	$	2,244			19.1	%	$	3,665			18.7	%	$	3,961			19.4	%