Note 12 - Income Taxes

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

12. Income Taxes

The Corporation and the Bank file a consolidated federal income tax return. The provision for income taxes for the years ended December 31 is comprised of the following:

(Dollar amounts in thousands)	2021			2020
Current	$	2,439		$	1,916
Deferred		(225	)		(481	)
Total	$	2,214		$	1,435

A reconciliation between the provision for income taxes and the amount computed by multiplying operating results before income taxes by the statutory federal income tax rate of 21% for the years ended December 31, 2021 and 2020 is as follows:

(Dollar amounts in thousands)	2021						2020
				% Pre-tax						% Pre-tax
	Amount			Income			Amount			Income
Provision at statutory tax rate	$	2,601			21.0	%	$	1,718			21.0	%
Increase (decrease) resulting from:
Tax free interest, net of disallowance		(304	)		(2.5	%)		(219	)		(2.7	%)
Earnings on bank-owned life insurance		(91	)		(0.7	%)		(84	)		(1.0	%)
Other, net		8			0.1	%		20			0.2	%
Provision	$	2,214			17.9	%	$	1,435			17.5	%

The tax effects of temporary differences between the financial reporting basis and income tax basis of assets and liabilities that are included in the net deferred tax asset as of December 31 relate to the following:

(Dollar amounts in thousands)	2021		2020
Deferred tax assets:
Allowance for loan losses	$	2,182	$	2,005
Funded status of pension plan		1,348		1,516
Deferred compensation		476		444
Lease liability		349		326
Accrued incentive compensation		146		60
Stock compensation		111		105
Securities impairment		70		70
Nonaccrual loan interest income		36		48
Net unrealized loss on securities		28		—
Other		6		15
Gross deferred tax assets		4,752		4,589
Deferred tax liabilities:
Accrued pension liability		1,055		1,036
Deferred loan fees and costs		684		519
Depreciation		571		772
Intangible assets		350		305
Lease right-of-use asset		319		289
Business combination adjustments		159		188
Net unrealized gains on securities		—		593
Other		96		47
Gross deferred tax liabilities		3,234		3,749
Net deferred tax asset	$	1,518	$	840

In accordance with relevant accounting guidance, the Corporation determined that it was not required to establish a valuation allowance for deferred tax assets since it is more likely than not that the deferred tax asset will be realized through future taxable income, future reversals of existing taxable temporary differences and tax strategies. The Corporation’s net deferred tax asset or liability is recorded in the consolidated financial statements as a component of other assets or other liabilities.

At December 31, 2021 and December 31, 2020, the Corporation had no unrecognized tax benefits. The Corporation does not expect the total amount of unrecognized tax benefits to significantly increase within the next twelve months. The Corporation recognizes interest and penalties on unrecognized tax benefits in income taxes expense in its Consolidated Statements of Income. 

The Corporation and the Bank are subject to U.S. federal income tax, a capital-based franchise tax in the Commonwealth of Pennsylvania as well as a corporate income tax in West Virginia based on earnings derived from business activity in the state. The Corporation and the Bank are no longer subject to examination by taxing authorities for years before 2018.