Note 15 - Income Taxes

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 15. Income Taxes 

Income tax expense is comprised of current and deferred, federal and state income taxes on the Company’s pre-tax earnings. The following table presents the components of the income tax provision for the periods indicated:

	Year Ended December 31,
(Amounts in thousands)	2020			2019			2018
Current tax expense:
Federal	$	10,048		$	9,603		$	7,201
State		1,643			1,554			1,233
Total current tax expense		11,691			11,157			8,434
Deferred tax expense (benefit):
Federal		(1,266	)		(152	)		296
State		(239	)		(11	)		52
Total deferred tax expense (benefit)		(1,505	)		(163	)		348
Total income tax expense	$	10,186		$	10,994		$	8,782

The Company’s effective tax rate, income tax as a percent of pre-tax income, may vary significantly from the statutory rate due to permanent differences and available tax credits. Permanent differences are income and expense items excluded by law in the calculation of taxable income. The Company’s most significant permanent differences generally include interest income on municipal securities and increases in the cash surrender value of life insurance policies. The following table reconciles the Company’s income tax expense to the amount computed by applying the federal statutory tax rate to pre-tax income for the periods indicated:

	Year Ended December 31,
	2020						2019						2018
	Amount			Percent			Amount			Percent			Amount			Percent
(Amounts in thousands)
Federal income tax at the statutory rate	$	9,683			21.00	%	$	10,457			21.00	%	$	9,475			21.00	%
State income tax, net of federal benefit		1,109			3.12	%		1,220			3.12	%		1,016			2.25	%
		10,792			24.12	%		11,677			24.12	%		10,491			23.25	%
Increase (decrease) resulting from:
Tax-exempt interest income		(500	)		(1.51	)%		(637	)		(1.28	)%		(702	)		(1.56	)%
Nondeductible goodwill impairment and disposition		—			0.00	%		—			0.00	%		569			1.26	%
Bank owned life insurance		(139	)		(0.42	)%		(249	)		(0.50	)%		(144	)		(0.32	)%
Deferred tax revaluation		—			0.00	%		(98	)		(0.20	)%		(1,669	)		(3.70	)%
Other items, net		33			(0.10	)%		301			0.10	%		237			0.53	%
Income tax at the effective tax rate	$	10,186			22.09	%	$	10,994			22.24	%	$	8,782			19.46	%

Deferred taxes derived from continuing operations reflect the net effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for tax purposes. The following table presents the significant components of the net deferred tax asset as of the dates indicated:

	December 31,
(Amounts in thousands)	2020		2019
Deferred tax assets
Allowance for loan losses	$	6,128	$	4,312
Unrealized asset losses		545		540
Purchase accounting		2,559		3,689
FDIC assisted transactions		1,685		1,597
Intangible assets		217		745
Deferred compensation assets		4,048		4,079
Federal net operating loss carryforward		4,093		4,279
Deferred loan fees		2,401		1,247
Other		1,816		1,746
Total deferred tax assets		23,492		22,234
Deferred tax liabilities
FDIC indemnification asset		286		675
Fixed assets		2,450		1,080
Odd days interest deferral		1,482		1,912
Unrealized gains on available for sale securities		257		230
Other		287		399
Total deferred tax liabilities		4,762		4,296
Net deferred tax asset	$	18,730	$	17,938

The Company had no unrecognized tax benefits or accrued interest or penalties as of December 31, 2020 or 2019. The Company had no deferred tax valuation allowance recorded as of December 31, 2020 or 2019, as management believes it is more likely than not that all of the deferred tax assets will be realized against deferred tax liabilities and projected future taxable income. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and various state tax departments for the years ended December 31, 2017 through 2019.