Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.20.4
Income Taxes
12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 17. INCOME TAXES

The components of the expense (benefit) for income taxes for the periods presented are as follows:

 

 

 

For the Years Ended December 31,

 

 

 

2020

 

 

2019

 

 

2018

 

 

 

(Dollars in thousands)

 

Current income tax expense:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

8,761

 

 

$

3,616

 

 

$

902

 

State

 

 

226

 

 

 

75

 

 

 

35

 

Total current income tax expense

 

 

8,987

 

 

 

3,691

 

 

 

937

 

Deferred income tax expense (benefit):

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

 

(1,528

)

 

 

1,730

 

 

 

1,065

 

State

 

 

 

 

 

 

 

 

 

Total deferred income tax expense (benefit)

 

 

(1,528

)

 

 

1,730

 

 

 

1,065

 

Total income tax expense (benefit)

 

$

7,459

 

 

$

5,421

 

 

$

2,002

 

 

A reconciliation of the expected income tax expense at the statutory federal income tax rate of 21% for the years ended December 31, 2020, 2019 and 2018 to the Company’s actual income tax expense and effective tax rate for the periods presented is as follows:

 

 

 

For the Years Ended December 31,

 

 

 

2020

 

 

2019

 

 

2018

 

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

Amount

 

 

%

 

 

 

(Dollars in thousands)

 

Tax expense at federal income tax rate

 

$

8,143

 

 

 

21.00

%

 

$

5,576

 

 

 

21.00

%

 

$

2,516

 

 

 

21.00

%

State taxes

 

 

206

 

 

 

0.53

%

 

 

62

 

 

 

0.23

%

 

 

28

 

 

 

0.23

%

Increase (decrease) resulting from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax-exempt interest

 

 

(373

)

 

 

-0.96

%

 

 

(447

)

 

 

-1.68

%

 

 

(377

)

 

 

-3.15

%

Bank-owned life insurance

 

 

(75

)

 

 

-0.19

%

 

 

(64

)

 

 

-0.24

%

 

 

(4

)

 

 

-0.03

%

Stock compensation

 

 

80

 

 

 

0.21

%

 

 

87

 

 

 

0.33

%

 

 

(247

)

 

 

-2.06

%

Interest expense exclusion

 

 

19

 

 

 

0.05

%

 

 

26

 

 

 

0.10

%

 

 

21

 

 

 

0.18

%

Meals and entertainment

 

 

31

 

 

 

0.08

%

 

 

29

 

 

 

0.11

%

 

 

18

 

 

 

0.15

%

Club dues

 

 

40

 

 

 

0.10

%

 

 

38

 

 

 

0.14

%

 

 

30

 

 

 

0.25

%

Acquisition expenses

 

 

 

 

 

0.00

%

 

 

156

 

 

 

0.59

%

 

 

155

 

 

 

1.29

%

NOL carryback claim

 

 

(575

)

 

 

-1.48

%

 

 

 

 

 

0.00

%

 

 

 

 

 

0.00

%

Other

 

 

(37

)

 

 

-0.10

%

 

 

(42

)

 

 

-0.17

%

 

 

(138

)

 

 

-1.15

%

Total

 

$

7,459

 

 

 

19.24

%

 

$

5,421

 

 

 

20.41

%

 

$

2,002

 

 

 

16.71

%

 

During 2020, 2019, and 2018 no changes were made to the corporate tax rate.      

Deferred income tax assets and liabilities reflect the tax effect of estimated temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for the same items for income tax reporting purposes.

The significant components of the net deferred tax assets and liabilities for the periods presented are as follows:

 

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(Dollars in thousands)

 

Deferred tax assets:

 

 

 

 

 

 

 

 

Allowance for loan losses

 

 

3,271

 

 

 

1,341

 

Organizational costs

 

 

41

 

 

 

28

 

Purchase accounting

 

 

1,416

 

 

 

1,895

 

Net operating loss

 

 

39

 

 

 

868

 

Stock Option Expense

 

 

445

 

 

 

231

 

Other

 

 

69

 

 

 

85

 

Total gross deferred tax assets

 

 

5,281

 

 

 

4,448

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

Unrealized gain on securities available-for-sale

 

 

(259

)

 

 

(172

)

Depreciation

 

 

(2,200

)

 

 

(2,494

)

Purchase accounting

 

 

(1,538

)

 

 

(2,296

)

SBA servicing

 

 

(92

)

 

 

(71

)

FHLB dividends

 

 

(107

)

 

 

(87

)

Total gross deferred tax liabilities

 

 

(4,196

)

 

 

(5,120

)

Deferred tax assets (liabilities), net

 

$

1,085

 

 

$

(672

)

 

The ability to realize deferred tax assets is dependent upon various factors, including the generation of future taxable income, the existence of taxes paid and recoverable, the reversal of deferred tax liabilities and tax planning strategies. Based upon these factors, management believes it is more likely than not that the Company will realize the benefits of these deferred tax assets.

The Company has federal net operating loss carryforwards of approximately $184 thousand which begin to expire in 2032. This amount is subject to a limitation by Section 382 of the Internal Revenue Code of 1986, as amended, to $2.1 million per year. The Company has determined that it is more likely than not that it will fully realize the benefit of such carryforwards prior to their expiration. Accordingly, a valuation allowance has not been recorded for federal net operating losses.

During the year ended December 31, 2020, the Company decided to carry back certain net operating losses as allowed by the CARES Act, which was enacted on March 27, 2020.  This resulted in recording a discrete income tax benefit in the amount of $575 thousand.

The Company did not have any uncertain tax positions at December 31, 2020.   The Company’s policy is to classify interest and penalties associated with income taxes within other expenses. The Company did not record interest and penalties for the year ended December, 31, 2020 or 2019.  The Company recorded interest and penalties of $23 thousand for the year ended December 31, 2018.