Note 11 - Income Taxes

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(11) Income Taxes

The components of the net deferred tax asset at  December 31, 2022 and 2021 were as follows:

	In Thousands
	2022			2021
Deferred tax asset:
Federal	$	40,690			11,604
State		13,095			3,613
		53,785			15,217
Deferred tax liability:
Federal		(1,850	)		(1,822	)
State		(612	)		(603	)
		(2,462	)		(2,425	)
Net deferred tax asset	$	51,323			12,792

The tax effects of each type of significant item that gave rise to deferred tax assets (liabilities) at  December 31, 2022 and 2021 were: 

	In Thousands
	2022			2021
Financial statement allowance for credit losses in excess of tax allowance	$	10,128			10,129
Excess of depreciation deducted for tax purposes over the amounts deducted in the financial statements		(1,801	)		(2,098	)
Financial statement deduction for deferred compensation in excess of deduction for tax purposes		1,464			1,347
Financial statement income on FHLB stock dividends not recognized for tax purposes		(327	)		(327	)
Financial statement off-balance sheet exposure allowance for credit losses in excess of tax allowance		1,604			—
Unrealized loss on securities available-for-sale		39,073			2,235
Equity based compensation		1,224			1,028
Other items, net		(42	)		478
Net deferred tax asset	$	51,323			12,792

The components of income tax expense (benefit) at  December 31, 2022, 2021 and 2020 are summarized as follows:

	In Thousands
	Federal			State			Total
2022
Current	$	15,096			2,011			17,107
Deferred		(1,565	)		(486	)		(2,051	)
Total	$	13,531			1,525			15,056
2021
Current	$	13,580			2,084			15,664
Deferred		(698	)		(234	)		(932	)
Total	$	12,882			1,850			14,732
2020
Current	$	11,383			1,539			12,922
Deferred		(2,503	)		(801	)		(3,304	)
Total	$	8,880			738			9,618

A reconciliation of actual income tax expense of $15,056,000, $14,732,000 and $9,618,000 for the years ended December 31, 2022, 2021 and 2020, respectively, to the “expected” tax expense (computed by applying the statutory rate of 21% for 2022, 2021 and 2020 to earnings before income taxes) is as follows:

	In Thousands
	2022			2021			2020
Computed “expected” tax expense	$	14,301			13,473			10,103
State income taxes, net of Federal income tax benefit		1,117			1,584			552
Tax exempt interest, net of interest expense exclusion		(274	)		(237	)		(245	)
Earnings on cash surrender value of life insurance		(273	)		(205	)		(173	)
Expenses not deductible for tax purposes		23			12			14
Equity based compensation		(55	)		(28	)		(6	)
Other		217			133			(627	)
	$	15,056			14,732			9,618

Total income tax expense (benefit) for 2022, 2021 and 2020, includes $(423,000), $7,000 and $231,000 of expense (benefit) related to the realized gain and loss on sale of securities, respectively.

As of December 31, 2022, 2021 and 2020 the Company has not accrued or recognized interest or penalties related to uncertain tax positions. It is the Company’s policy to recognize interest and/or penalties related to income tax matters in income tax expense.

No valuation allowance for deferred tax assets was recorded at December 31, 2022 and 2021 as management believes it is more likely than not that all of the deferred tax assets will be realized against deferred tax liabilities and projected future taxable income. There were no unrecognized tax benefits during any of the reported periods.

The Company and Wilson Bank file income tax returns in the United States (“U.S.”), as well as in the State of Tennessee. The Company is no longer subject to U.S. federal or state income tax examinations by tax authorities for years before 2019. The Company’s Federal tax returns have been audited through December 31, 2005 with no changes.