NOTE 13 – NET DEFERRED TAX ASSET AND INCOME TAXES

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

NOTE 13 – NET DEFERRED TAX ASSET AND INCOME TAXES

NOTE 13 – NET DEFERRED TAX ASSET AND INCOME TAXES

Salisbury provides deferred taxes for the estimated future tax effects attributable to temporary differences and carry-forwards when realization is more likely than not. The components of the income tax provision were as follows:

Years ended December 31, (in thousands)		2020			2019			2018
Federal	$	3,487		$	2,406		$	1,986
State		566			344			217
Current provision		4,053			2,750			2,203
Federal		(1,335	)		(317	)		(455	)
State		(265	)		(74	)		(39	)
Deferred (benefit) expense		(1,600	)		(391	)		(494	)
Income tax provision	$	2,453		$	2,359		$	1,709

The following is a reconciliation of the expected federal statutory tax to the income tax provision:

Years ended December 31,	2020		2019		2018
Income tax at statutory federal tax rate	21.00	%	21.00	%	21.00	%
State tax, net of federal tax benefit	1.97		1.58		1.37
Tax exempt income and dividends received deduction	(3.69	)	(3.82	)	(3.84	)
BOLI interest and gain	(1.60	)	(0.61	)	(1.35	)
Other	(0.64	)	(0.67	)	(0.95	)
Effective income tax rates	17.04	%	17.48	%	16.23	%

The components of Salisbury's net deferred tax assets are as follows:

December 31, (in thousands)		2020			2019
Allowance for loan losses	$	3,355		$	2,174
Interest on non-performing loans		214			244
Accrued deferred compensation		517			493
Post-retirement benefits		11			11
Other real estate owned write-downs		-			30
Restricted stock awards		196			220
Deferred loan fees, net		90			-
Loss on equity securities		-			2
Other		98			139
Gross deferred tax assets		4,481			3,313
Deferred loan costs, net		-			(329	)
Mark-to-market purchase accounting adjustments		(8	)		(44	)
Goodwill and core deposit intangible asset		(590	)		(570	)
Accelerated depreciation		(522	)		(703	)
Gain on equity securities		(2	)		-
Mortgage servicing rights		(150	)		(58	)
Net unrealized holding gains on available-for-sale securities		(797	)		(360	)
Gross deferred tax liabilities		(2,069	)		(2,064	)
Net deferred tax asset	$	2,412		$	1,249

Salisbury will only recognize a deferred tax asset when, based upon available evidence, realization is more likely than not. In accordance with Connecticut legislation, in 2004, Salisbury formed a PIC, SBT Mortgage Service Corporation. Salisbury does not expect to pay Connecticut state income tax in the foreseeable future unless there is a change in Connecticut law.

Salisbury’s policy is to provide for uncertain tax positions and the related interest and penalties (recorded as a component of income tax expense, if any) based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. As of December 31, 2020, and 2019, there were no material uncertain tax positions related to federal and state tax matters. Salisbury is currently open to audit under the statute of limitations by the Internal Revenue Service and state taxing authorities for the years ended December 31, 2017 through December 31, 2020.