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Income Taxes
12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

Note 11 –Income Taxes

The components of the income tax for the Company consisted of the following at December 31:

 

 

 

2021

 

 

2020

 

 

 

(dollars in thousands)

 

Current tax expense

 

$

10,383

 

 

$

5,069

 

Deferred tax benefit

 

 

(3,011

)

 

 

(1,074

)

Total tax expense

 

$

7,372

 

 

$

3,995

 

 

At December 31, 2021 the current net income tax payable was $1.2 million and at December 31, 2020 the net income tax receivable was $599,000.  

A reconciliation of the income tax expense (benefit) and the amount computed by applying the statutory federal income tax rate to the income before income taxes is as follows for the year ended December 31:  

 

 

 

2021

 

 

2020

 

 

 

(dollars in thousands)

 

 

 

Amount

 

 

Rate

 

 

Amount

 

 

Rate

 

Federal income tax at statutory rate

 

$

7,219

 

 

 

21.0

%

 

$

4,020

 

 

 

21.0

%

State income taxes

 

 

256

 

 

 

0.7

 

 

$

-

 

 

 

0.0

%

Effect of tax-exempt interest income

 

 

(100

)

 

 

(0.3

)

 

 

(110

)

 

 

(0.6

)

Stock-based compensation

 

 

(43

)

 

 

(0.1

)

 

 

51

 

 

 

0.3

 

Bank owned life insurance earnings

 

 

(36

)

 

 

(0.1

)

 

 

(42

)

 

 

(0.2

)

Excess executive compensation

 

 

58

 

 

 

0.2

 

 

 

-

 

 

 

-

 

Other

 

 

18

 

 

 

0.1

 

 

 

76

 

 

 

-

 

 

 

$

7,372

 

 

 

21.4

%

 

$

3,995

 

 

 

20.5

%

 

The Company did not record or accrue any interest and penalties related to income taxes for the years ended December 31, 2021 or 2020.  The Company and Bank have entered into a tax allocation agreement, which provides that income taxes shall be allocated between the parties on a monthly basis.  The intent of this agreement is that each member of the consolidated group will incur no greater tax liability than it would have incurred on a stand-alone basis.

The net deferred tax asset consists of the following temporary differences and carryforward items at December 31:

 

 

 

2021

 

 

2020

 

 

 

(dollars in thousands)

 

Deferred tax assets:

 

 

 

 

 

 

 

 

Allowance for loan losses

 

$

6,223

 

 

$

4,045

 

Lease liability

 

 

1,374

 

 

 

1,538

 

Accrued expenses

 

 

596

 

 

 

507

 

Deferred compensation

 

 

162

 

 

 

181

 

Allowance for unfunded commitments

 

 

277

 

 

 

131

 

Nonqualified stock options

 

 

107

 

 

 

104

 

Interest on nonaccrual loans

 

 

10

 

 

 

41

 

Equity investment write-down

 

 

-

 

 

 

84

 

Restricted stock options

 

 

196

 

 

 

33

 

Deferred income

 

 

58

 

 

 

15

 

Other

 

 

37

 

 

 

-

 

Total deferred tax assets

 

 

9,040

 

 

 

6,679

 

 

 

 

 

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

Right of use asset

 

 

(1,327

)

 

 

(1,495

)

Depreciation and amortization

 

 

(661

)

 

 

(1,376

)

Net unrealized gain on equity security

 

 

(233

)

 

 

-

 

Net unrealized gain on available-for-sale securities

 

 

(1

)

 

 

(9

)

Total deferred tax liabilities

 

 

(2,222

)

 

 

(2,880

)

Net deferred tax asset

 

$

6,818

 

 

$

3,799

 

 

The determination of the amount of deferred income tax assets which are more likely than not to be realized is primarily dependent on projections of future earnings, which are subject to uncertainty and estimates that may change given economic conditions and other factors. The realization of deferred income tax assets is regularly assessed and a valuation allowance is recorded if it is “more likely than not” that all or a portion of the deferred tax asset will not be realized. “More likely than not” is defined as greater than a 50% chance. All available evidence, both positive and negative is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed. Based upon its analysis of available evidence, including recent profitability, management has determined that it is “more likely than not” that the Company’s deferred income tax assets as of December 31, 2021 will be fully realized and therefore no valuation allowance was recorded.

At December 31, 2021, the Company had  no federal net operating loss carryforwards or tax credit carryforwards. The Company files federal and various state income tax returns.  Federal tax returns for the 2018 tax year and later are open for examination. The total amount of unrecognized tax benefits, including interest and penalties, at December 31, 2021 was not material. The amount of tax benefits that would impact the effective rate, if recognized, is not expected to be material. The Company does not anticipate any significant changes with respect to unrecognized tax benefits within the next 12 months.