Note 10 - Federal Income Taxes

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 10 - FEDERAL INCOME TAXES

The consolidated income tax expense is as follows: 

	2021		2020			2019
Current expense	$	12,675,000	$	14,945,000		$	10,978,000
Deferred expense		2,020,000		(4,141,000	)		26,000
Change in valuation allowance		0		(94,000	)		0
Tax expense	$	14,695,000	$	10,710,000		$	11,004,000

A reconciliation of the differences between the federal income tax expense recorded and the amount computed by applying the federal statutory rate to income before income taxes is as follows:

	2021			2020			2019
Tax at statutory rate	$	15,481,000		$	11,518,000		$	12,697,000
Increase (decrease) from
Tax-exempt interest		(658,000	)		(681,000	)		(644,000	)
Bank owned life insurance		(233,000	)		(238,000	)		(804,000	)
Change in valuation allowance		0			(94,000	)		0
Other		105,000			205,000			(245,000	)
Tax expense	$	14,695,000		$	10,710,000		$	11,004,000

The statutory tax rate was 21% for 2021, 2020 and 2019.

Significant components of deferred tax assets and liabilities as of December 31, 2021 and 2020 are as follows:

	2021		2020
Deferred income tax assets
Allowance for loan losses	$	7,426,000	$	7,973,000
Deferred compensation		259,000		511,000
Stock compensation		941,000		541,000
Nonaccrual loan interest income		159,000		211,000
Deferred loan fees		520,000		924,000
Unrealized loss on securities		991,000		0
Fair value write-downs on foreclosed properties		0		537,000
Other		1,344,000		938,000
Deferred tax asset		11,640,000		11,635,000
Deferred income tax liabilities
Depreciation		1,168,000		1,175,000
Prepaid expenses		416,000		297,000
Core deposit intangible		276,000		498,000
Mortgage loan servicing rights		2,572,000		1,720,000
Unrealized gain on securities		0		1,458,000
Business combination adjustments		2,013,000		2,142,000
Other		942,000		521,000
Deferred tax liability		7,387,000		7,811,000
Total net deferred tax asset	$	4,253,000	$	3,824,000

A valuation allowance related to deferred tax assets is required when it is considered more likely than not that all or part of the benefits related to such assets will not be realized. We determined that no valuation allowance was required at year-end 2020 or 2021.

We had no unrecognized tax benefits at any time during 2021 or 2020 and do not anticipate any significant increase in unrecognized tax benefits during 2022. Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is our policy to record such accruals in our income tax accounts; no such accruals existed at any time during 2021 or 2020. Our U.S. federal income tax returns are no longer subject to examination for all years before 2018.