Note 7 - Income Tax |
6 Months Ended |
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Jun. 30, 2025 | |
| Notes to Financial Statements | |
| Income Tax Disclosure [Text Block] |
Note 7 - Income Tax
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. These calculations are based on many complex factors including estimates of the timing of reversals of temporary differences, the interpretation of federal income tax laws, and a determination of the differences between the tax and the financial reporting basis of assets and liabilities. Actual results could differ significantly from the estimates and interpretations used in determining the current and deferred income tax assets and liabilities.
The effective tax rates were 13.3% and 5.2% for the six months ended June 30, 2025 and 2024, respectively. The effective tax rates differ from the statutory maximum federal tax rate for 2025 and 2024 of 21%, largely due to the nontaxable earnings on BOLI and tax-exempt interest income earned on certain investment securities and loans. Estimates for taxes and penalties on the early surrender of BOLI contracts were recorded in both periods, further impacting the effective tax rate calculation. The effective tax rate does not include a valuation allowance for the net deferred tax asset based on management’s evaluation of cumulative earnings inclusive of other comprehensive income and available tax planning strategies.
On July 4, 2025, President Trump signed H.R. 1, the "One Big Beautiful Bill Act," into law. This legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the reinstatement of 100% bonus depreciation and more favorable rules for determining the limitation on business interest expense. The Company is currently evaluating the impact on future periods.
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