Income Taxes

6 Months Ended

Jun. 30, 2021

Income Taxes

Income Taxes

7) Income Taxes

Some items of income and expense are recognized in one year for tax purposes, and another when applying generally accepted accounting principles, which leads to timing differences between the Company’s actual current tax liability and the amount accrued for this liability based on book income. These temporary differences comprise the “deferred” portion of the Company’s tax expense or benefit, which is accumulated on the Company’s books as a deferred tax asset or deferred tax liability until such time as they reverse.

Under generally accepted accounting principles, a valuation allowance is required if it is “more likely than not” that a deferred tax asset will not be realized. The determination of the realizability of the deferred tax assets is highly subjective and dependent upon judgment concerning management’s evaluation of both positive and negative evidence, including forecasts of future income, cumulative losses, applicable tax planning strategies, and assessments of current and future economic and business conditions.

The Company had net deferred tax assets of $26,917,000, and $28,221,000, at June 30, 2021 and December 31, 2020, respectively. After consideration of the matters in the preceding paragraph, the Company determined that it is more likely than not that the net deferred tax assets at June 30, 2021 and December 31, 2020 will be fully realized in future years.

The following table reflects the carrying amounts of the low income housing investments included in accrued interest receivable and other assets, and the future commitments included in accrued interest payable and other liabilities for the periods indicated:

	June 30,		December 31,
	2021		2020
	(Dollars in thousands)
Low income housing investments	$	4,827	$	5,246
Future commitments	$	596	$	596

The Company expects $46,000 of the future commitments to be paid in 2021, and $550,000 in 2022 through 2025.

For tax purposes, the Company had low income housing tax credits of $210,000 for the three months ended June 30, 2021 and June 30, 2020, and low income housing investment expense of $209,000 and $211,000, respectively. For tax purposes, the Company had low income housing tax credits of $420,000 for the six months ended June 30, 2021 and June 30, 2020, and low income housing investment expense of $418,000 and $420,000, respectively. The Company recognized low income housing investment expense as a component of income tax expense.