Note 14 - Income Taxes

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 14. 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)	2022		2021		2020
Current tax expense:
Federal	$	9,883	$	8,546	$	10,048
State		1,648		1,563		1,643
Total current tax expense		11,531		10,109		11,691
Deferred tax expense (benefit):
Federal		1,800		4,677		(1,266	)
State		164		574		(239	)
Total deferred tax expense (benefit)		1,964		5,251		(1,505	)
Total income tax expense	$	13,495	$	15,360	$	10,186

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,
	2022						2021						2020
	Amount			Percent			Amount			Percent			Amount			Percent
(Amounts in thousands)
Federal income tax at the statutory rate	$	12,633			21.00	%	$	13,971			21.00	%	$	9,683			21.00	%
State income tax, net of federal benefit		1,432			2.38	%		2,076			3.12	%		1,109			3.12	%
		14,065			23.38	%		16,047			24.12	%		10,792			24.12	%
Increase (decrease) resulting from:
Tax-exempt interest income		(347	)		(0.58	)%		(340	)		(0.51	)%		(500	)		(1.08	)%
Excess tax benefits		(24	)		(0.04	)%		(133	)		(0.20	)%		42			0.09	%
Bank owned life insurance		(68	)		(0.11	)%		(225	)		(0.34	)%		(139	)		(0.30	)%
Other items, net		(131	)		(0.22	)%		11			0.02	%		(9	)		(0.74	)%
Income tax at the effective tax rate	$	13,495			22.43	%	$	15,360			23.09	%	$	10,186			22.09	%

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)	2022			2021
Deferred tax assets
Allowance for loan losses	$	7,283		$	6,647
Unrealized losses on available-for-sale securities		4,153			—
Unrealized asset losses		503			482
Purchase accounting		148			455
FDIC assisted transactions		588			810
Deferred loan fees		2,074			2,350
Deferred compensation assets		5,035			5,634
Federal net operating loss carryforward		1,223			2,179
Lease liability		160			184
Other		707			472
Total deferred tax assets		21,874			19,213
Deferred tax liabilities
Fixed assets		(755	)		(1,046	)
Intangible assets		(857	)		(318	)
Odd days interest deferral		(4,010	)		(3,324	)
Unrealized gains on available for sale securities		—			(4	)
Right of use asset		(155	)		(177	)
Other		(197	)		(192	)
Total deferred tax liabilities		(5,974	)		(5,061	)
Net deferred tax asset	$	15,900		$	14,152

The Company had no unrecognized tax benefits or accrued interest or penalties as of December 31, 2022 or 2021. The Company had no deferred tax valuation allowance recorded as of December 31, 2022 or 2021, 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 and its subsidiaries are subject to U.S. federal income tax of the various states.  The Company is no longer subject to examination by federal or state taxing authorities for years before 2019.