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INCOME TAXES | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income tax expense for the years ended December 31, 2024, 2023 and 2022 consisted of the following:
(dollars in thousands) | 2024 |  | 2023 |  | 2022
Current federal | $ | 21,949 |  |  | $ | 16,171 |  |  | $ | 22,825 |
Deferred federal | (2,829) |  |  | 1,302 |  |  | (2,327) |
Current state | 63 |  |  | (131) |  |  | 1,297 |
Deferred state | (972) |  |  | (776) |  |  | (448) |
Total income tax expense | $ | 18,211 |  |  | $ | 16,566 |  |  | $ | 21,347 |
The differences between financial statement tax expense and amounts computed by applying the statutory federal income tax rate of 21% to income before income taxes were as follows:
(dollars in thousands) | 2024 |  | 2023 |  | 2022
Income taxes at statutory federal rate of 21% | $ | 23,455 |  |  | $ | 23,170 |  |  | $ | 26,284 |
Increase (decrease) in taxes resulting from: |  |  |  |  |
Tax exempt income | (3,712) |  |  | (4,226) |  |  | (4,438) |
Nondeductible expense | 280 |  |  | 269 |  |  | 159 |
State income tax, net of federal tax effect | (718) |  |  | (716) |  |  | 671 |
Captive insurance premium income | 0 |  |  | (261) |  |  | (417) |
Tax credit investments | (150) |  |  | (713) |  |  | (586) |
Bank owned life insurance | (903) |  |  | (658) |  |  | (78) |
Long-term incentive plan and deferred compensation | (270) |  |  | (715) |  |  | (530) |
Nondeductible compensation expense | 405 |  |  | 784 |  |  | 181 |
Other | (176) |  |  | (368) |  |  | 101 |
Total income tax expense | $ | 18,211 |  |  | $ | 16,566 |  |  | $ | 21,347 |
NOTE 12 – INCOME TAXES (continued) The net deferred tax asset recorded in the consolidated balance sheets at December 31, 2024 and 2023 consisted of the following:
(dollars in thousands) | 2024 |  | 2023
Deferred tax assets: |  |  |
Bad debts | $ | 21,909 |  |  | $ | 18,384 |
Pension and deferred compensation liability | 2,166 |  |  | 1,823 |
Nonaccrual loan interest | 955 |  |  | 494 |
Long-term incentive plan | 1,755 |  |  | 2,342 |
Lease liability | 1,727 |  |  | 1,199 |
Deferred loan fees | 574 |  |  | 781 |
Accrued legal reserve | 0 |  |  | 635 |
Net operating loss carryforward | 1,343 |  |  | 913 |
Other | 724 |  |  | 591 |
| 31,153 |  |  | 27,162 |
Deferred tax liabilities: |  |  |
Depreciation | 3,324 |  |  | 3,645 |
Loan servicing rights | 502 |  |  | 570 |
State taxes | 1,153 |  |  | 949 |
Intangible assets | 1,267 |  |  | 1,270 |
REIT spillover dividend | 2,040 |  |  | 2,140 |
Prepaid expenses | 900 |  |  | 801 |
Lease right of use | 1,727 |  |  | 1,199 |
Other | 331 |  |  | 480 |
| 11,244 |  |  | 11,054 |
Valuation allowance | 0 |  |  | 0 |
Net deferred tax asset | $ | 19,909 |  |  | $ | 16,108 |
At December 31, 2024, the Company has Indiana net operating loss carryforwards of approximately $29.9 million that will expire in 2038 if not used. Management has concluded that the state net operating losses will be fully utilized and therefore no valuation allowance is necessary on the state net operating loss. In addition to the net deferred tax assets included above, the deferred income tax asset (liability) allocated to the unrealized net gain (loss) on securities available-for-sale included in equity was $44.1 million and $41.1 million for 2024 and 2023, respectively. The deferred income tax asset allocated to the pension plan and SERP included in equity was $188,000 and $243,000 for 2024 and 2023, respectively. The Company evaluated its deferred tax asset at year end 2024 and has concluded that it is more likely than not that it will be realized. The Company expects to have taxable income in the future such that the deferred tax asset will be realized. Therefore, no valuation allowance is required. Unrecognized Tax Benefits The Company did not have any unrecognized tax benefits at December 31, 2024 or 2023. The Company does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months. No interest or penalties were recorded in the income statement and no amount was accrued for interest and penalties for the periods ending December 31, 2024, 2023 and 2022. Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is the Company’s policy to record such accruals in its income taxes accounts. The Company and its subsidiaries file a consolidated U.S. federal tax return and a combined unitary return in the States of Indiana and Michigan. These returns are subject to examinations by authorities for all years after 2020.

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