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INCOME TAXES
12 Months Ended
Dec. 31, 2021
INCOME TAXES  
INCOME TAXES

NOTE 14 - INCOME TAXES

The following presents the components of the Company’s income tax expense as of December 31 (in thousands):

    

2021

    

2020

Current:

 

  

 

  

Federal

$

6,228

$

7,970

State and local

 

1,110

 

1,859

Total current tax expense

 

7,338

 

9,829

Deferred:

Federal

(734)

(1,392)

State and local

 

66

 

(280)

Valuation allowance

 

 

372

Total deferred tax benefit

 

(668)

 

(1,300)

Income tax expense

$

6,670

$

8,529

The following is a reconciliation of income taxes reflected on the Consolidated Statements of Income for the years ended December 31, 2021 and 2020, with income tax expense computed by applying the United States federal income tax rate of 21% to income before income taxes (in thousands):

    

2021

    

2020

Income tax expense computed at 21% statutory rate

$

5,729

$

6,943

Differences:

 

  

 

  

Permanent differences

 

169

 

(57)

State taxes, net of federal expense

 

1,018

 

1,150

LIHTC investment tax credit

(386)

(36)

LIHTC investment proportional amortization

539

Valuation allowance

372

Other, net

 

(399)

 

157

Income tax expense

$

6,670

$

8,529

The following presents the principal components of the Company’s deferred tax items as of December 31 (in thousands):

    

2021

    

2020

Deferred tax assets:

 

  

 

  

Net operating loss carryforwards

$

395

$

577

Allowance for loan losses

 

3,385

 

3,054

Acquired loans fair market value adjustments

976

Acquisition related basis adjustment

226

Deferred rent

 

753

 

635

Stock-based compensation

 

1,800

 

1,613

Provision on other real estate owned

 

463

 

484

Other intangible assets

 

279

 

615

Accrued bonuses

 

868

 

898

Loan fees

 

 

244

Accrued expenses

821

Other

 

382

 

553

Total deferred tax assets

 

10,348

 

8,673

Deferred tax liabilities:

 

  

 

  

Goodwill

(1,137)

(1,013)

Depreciation

(1,636)

(904)

Unrealized gain on securities

(73)

(236)

Loan fees

(155)

Other

 

(130)

 

(92)

Total deferred tax liabilities

 

(3,131)

 

(2,245)

Net operating loss valuation allowance

(372)

(372)

Net deferred tax asset

$

6,845

$

6,056

Management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the total deferred tax assets. The net operating loss ("NOL") carryforwards expire in tax years 2028 through 2032. As of December 31, 2021, the Company has $5.5 million of California NOLs available for utilization, compared to $6.5 million as of December 31, 2020. For taxable years 2020, 2021, and 2022, California has suspended the NOL carryover deduction. Both corporations and individual tax payers may continue to compute and carryover an NOL during the suspension period. Different rules apply depending on the amount of income per year. The suspension does not apply to corporate tax payers if their income subject to California taxation is less than $1 million. During 2020, as a result of this tax legislation and certain divestitures in California, the Company was uncertain as to the probability of realizing the full NOL. As such, the Company recorded a $4.3 million valuation allowance related to the California NOLs, resulting in a tax effected valuation allowance of $0.4 million. The Company identified no other material uncertain tax positions for which it is reasonably possible the total amount of unrecognized tax benefits will significantly increase or decrease within 12 months. For the tax year ended December 31, 2020, the Company’s apportioned California income was just under $1 million and therefore was able to utilize the same amount in NOLs.

The Company and its subsidiaries file tax returns for the United States and for multiple states and localities. The United States federal income tax returns of the Company are eligible to be examined for the years 2017 and forward. There are no federal or state tax examinations currently in progress.