Quarterly report pursuant to Section 13 or 15(d)

Note 9 - Federal Income Taxes

v3.23.2
Note 9 - Federal Income Taxes
 6 Months Ended
Jun. 30, 2023
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 9 - FEDERAL INCOME TAXES

 

Income tax expense was as follows (dollars in thousands):

 

   

Three Months
Ended
June 30,
2023

    

Three Months
Ended
June 30,
2022

    

Six Months
Ended
June 30,
2023

    

Six Months
Ended
June 30,
2022

  

Current

   $ 2,442     $ 1,416     $ 5,267     $ 2,351  

Deferred

     32

 

     77       182

 

     533  
    $ 2,474     $ 1,493     $ 5,449     $ 2,884  

 

The difference between the financial statement tax expense and amount computed by applying the statutory federal tax rate to pretax income was reconciled as follows (dollars in thousands):

 

   

Three Months
Ended
June 30,
2023

    

Three Months
Ended
June 30,
2022

    

Six Months
Ended
June 30,
2023

    

Six Months
Ended
June 30,
2022

  

Statutory rate

     21

%

     21

%

     21

%

     21

%

Statutory rate applied to income before taxes

   $ 2,685     $ 1,693     $ 5,831     $ 3,245  

Deduct

                                

Tax-exempt interest income

     (142

)

     (143

)

     (289

)

     (297

)

Bank-owned life insurance

     (46

)

     (49

)

     (88

)

     (99

)

Other, net

     (23

)

     (8

)

     (5

)

     35  
    $ 2,474     $ 1,493     $ 5,449     $ 2,884  

 

The realization of deferred tax assets is largely dependent upon future taxable income, future reversals of existing taxable temporary differences and the ability to carryback losses to available tax years. In assessing the need for a valuation allowance, we consider positive and negative evidence, including taxable income in carry-back years, scheduled reversals of deferred tax liabilities, expected future taxable income and tax planning strategies. Management believes it is more likely than not that all of the deferred tax assets at June 30, 2023 will be realized against deferred tax liabilities and projected future taxable income.

 

The net deferred tax asset recorded included the following amounts of deferred tax assets and liabilities (dollars in thousands):

 

   

June 30,
2023

    

December 31,
2022

  

Deferred tax assets

                

Allowance for credit losses

   $ 3,592     $ 3,210  

Net deferred loan fees

     —       —  

Nonaccrual loan interest

     13       12  

Valuation allowance on other real estate owned

     —       —  

Unrealized loss on securities available for sale and transferred to held to maturity

     8,177       8,394  

Other

     394       257  

Gross deferred tax assets

     12,176       11,873  

Valuation allowance

     —       —  

Total net deferred tax assets

     12,176       11,873  

Deferred tax liabilities

                

Depreciation

     (1,075

)

     (1,098

)

Net deferred loan fees

     (8

)

     (309

)

Prepaid expenses

     (309

)

     (21

)

Other

     (1,148

)

     (733

)

Gross deferred tax liabilities

     (2,540

)

     (2,161

)

Net deferred tax asset

   $ 9,636     $ 9,712  

 

There were no unrecognized tax benefits at June 30, 2023 or December 31, 2022 and the Company does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months. The Company is no longer subject to audit by the Internal Revenue Service for years before 2020.