Income Tax

12 Months Ended

Dec. 31, 2020


	December 31 2020		December 31 2019		December 31 2018
Income tax expense
Currently payable
Federal	$	16,914	$	11,143	$	9,166
State	2,377		140		—
Deferred
Federal	(7,970)		1,787		1,277
State	(1,451)		233		—

Total income tax expense	$	9,870	$	13,303	$	10,443
Reconciliation of federal statutory to actual tax expense
Federal statutory income tax at 21%	$	16,457	$	16,767	$	13,348
Tax exempt interest	(4,090)		(2,977)		(1,982)
Tax exempt income	(531)		(587)		(448)
Stock compensation	(160)		(324)		(384)

Other tax exempt income	(334)		(313)		(260)
State tax	733		295		—
Tax credit investments	(2,284)		—		—
Nondeductible and other	79		442		169
Actual tax expense	$	9,870	$	13,303	$	10,443


	December 31 2020		December 31 2019
Assets
Allowance for loan losses	$	13,966	$	4,120
Net operating loss and tax credits (from acquisitions)	3		54
Director and employee benefits	2,035		1,890

Accrued pension	—		775


Other	3,139		2,145
Total assets	19,143		8,984
Liabilities
Depreciation	(4,374)		(4,456)
State tax	(315)		(10)
Federal Home Loan Bank stock dividends	(363)		(368)
Difference in basis of intangible assets	(2,921)		(3,427)
Fair value adjustment on acquisitions	(3,284)		(2,488)
Unrealized gain on AFS securities and fair value hedge	(7,404)		(1,710)
Other	(294)		(63)
Total liabilities	(18,955)		(12,522)

Net deferred tax asset/(liability)	$	188	$	(3,538)

As of December 31, 2020, the Company had approximately $50,000 of state tax loss available to offset future franchise taxable income. The state loss carryforward begins to expire in 2023. Due to these losses being incurred by acquired institutions, prior to the acquisitions by Horizon, the annual losses which can be used are subject to an annual limitation. Management believes that the Company will be able to fully utilize the state loss carryforwards within the allotted time periods, and reversed the valuation allowance in 2019 previously recorded for the possible inability to use a portion of the carryforwards.

Retained earnings of the Bank include approximately $12.8 million for which no deferred income tax liability has been recognized. This amount represents an allocation of previously acquired institutions income to bad debt deductions as of December 31, 1987 for tax purposes only. Reductions of amounts so allocated for purposes other than tax bad debt losses including redemption of bank stock or excess dividends, or loss of “bank” status would create income for tax purposes only, which would be subject to the then-current corporate income tax rate. The unrecorded deferred income tax liability on the above amount for the Company was approximately $2.7 million at December 31, 2020.

The Company files income tax returns in the U.S. federal jurisdiction. With a few exceptions, the Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 2017.