Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Tax Cuts and Jobs Act ("TCJA") signed into law on December 22, 2017, makes broad and complex changes to the U.S. tax code that affected income tax expense in 2017. The TCJA reduced the U.S. federal corporate income tax rate from 35% to 21% beginning January 1, 2018 and also established new tax laws that affect 2018.

The following is a summary of the provision for income taxes included in the Consolidated Statements of Income:

	December 31,
(in thousands)	2020		2019		2018
Current	$	8,964	$	3,770	$	3,929
Deferred	(3,745)		(114)		(467)
Total	$	5,219	$	3,656	$	3,462

The difference between income taxes computed by applying the statutory federal income tax rate and the provision for income taxes in the financial statements is reconciled as follows:

	December 31,
(in thousands except for %)	2020			2019			2018
Statutory tax rate	21.0		%	21.0		%	21.0		%
Federal income taxes at statutory rate	$	5,363		$	3,758		$	3,712
Tax exempt municipal income	(124)			(140)			(166)
Other	(20)			38			(84)
Total	$	5,219		$	3,656		$	3,462

Deferred taxes are recorded based upon differences between the financial statement and tax basis of assets and liabilities, and available tax credit carry forwards. Temporary differences between the financial statement and tax values of assets and liabilities give rise to deferred taxes. The significant components of deferred taxes classified in First Guaranty's Consolidated Balance Sheets at December 31, 2020 and 2019 are as follows:

	December 31,
(in thousands)	2020		2019
Deferred tax assets:
Allowance for loan losses	$	4,748	$	1,720
Other real estate owned	239		257
Unrealized losses on available for sale securities	—		—
Net operating loss	1,190		1,282
Other	581		508
Gross deferred tax assets	6,758		3,767
Deferred tax liabilities:
Depreciation and amortization	(1,952)		(2,010)
Core deposit intangibles	(1,214)		(1,359)
Unrealized gains on available for sale securities	(172)		(578)
Discount on purchased loans	(161)		(267)
Other	(625)		(670)
Gross deferred tax liabilities	(4,124)		(4,884)
Net deferred tax assets (liabilities)	$	2,634	$	(1,117)

First Guaranty determined that the net deferred tax asset at December 31, 2020 was more likely than not to be realized based on an assessment of all available positive and negative evidence, and therefore no valuation allowance was recorded.

Net operating loss carryforwards for income tax purposes were $5.7 million as of December 31, 2020 and $6.1 million in 2019. The carryforwards were acquired in 2017 in the Premier acquisition and expire from 2027 to 2034, and will be utilized subject to annual Internal Revenue Code Section 382 limitations.

ASC 740-10, Income Taxes, clarifies the accounting for uncertainty in income taxes and prescribes a recognition threshold and measurement attribute for the consolidated financial statements recognition and measurement of a tax position taken or expected to be taken in a tax return. First Guaranty does not believe it has any unrecognized tax benefits included in its consolidated financial statements. First Guaranty has not had any settlements in the current period with taxing authorities, nor has it recognized tax benefits as a result of a lapse of the applicable statute of limitations. First Guaranty recognizes interest and penalties accrued related to unrecognized tax benefits, if applicable, in noninterest expense. During the years ended December 31, 2020, 2019 and 2018, First Guaranty did not recognize any interest or penalties in its consolidated financial statements, nor has it recorded an accrued liability for interest or penalty payments.