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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

Note 12 – Income Taxes

Information as of December 31 and for the year follows:

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

 

2022

 

 

2021

 

 

Provision for Income Taxes

 

 

 

 

 

 

 

 

 

 

Current federal income tax expense

 

$

4,330

 

 

$

4,033

 

 

$

3,532

 

 

Deferred federal income tax expense/(benefit)

 

 

(24

)

 

 

(15

)

 

 

924

 

 

Income tax expense

 

$

4,306

 

 

$

4,018

 

 

$

4,456

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Income Tax Provision to Statutory Rate

 

 

 

 

 

 

 

 

 

 

Income tax computed at statutory federal rate of 21%

 

$

5,369

 

 

$

5,808

 

 

$

5,565

 

 

Tax exempt interest income

 

 

(1,206

)

 

 

(1,323

)

 

 

(1,190

)

 

Tax exempt earnings on bank-owned life insurance

 

 

(230

)

 

 

(276

)

 

 

(170

)

 

Tax credits

 

 

(282

)

 

 

(289

)

 

 

(284

)

 

Disallowed interest expense

 

 

752

 

 

 

179

 

 

 

74

 

 

Other items

 

 

(97

)

 

 

(81

)

 

 

461

 

 

Income tax expense

 

$

4,306

 

 

$

4,018

 

 

$

4,456

 

 

 

 

 

 

 

 

 

 

 

 

Effective income tax rate

 

 

17

%

 

 

15

%

 

 

17

%

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Components of Deferred Tax Assets and Liabilities

 

2023

 

 

2022

 

Deferred tax assets:

 

 

 

 

 

 

 Purchase accounting adjustments from mergers with County and Community Shores

 

$

529

 

 

$

945

 

Allowance for credit losses

 

 

3,294

 

 

 

1,600

 

Unrealized losses on securities available for sale

 

 

15,279

 

 

 

19,745

 

Net operating loss carryforward

 

 

466

 

 

 

505

 

Unfunded commitment reserve

 

 

454

 

 

 

-

 

Compensation

 

 

347

 

 

 

299

 

Other

 

 

761

 

 

 

716

 

Total deferred tax assets

 

 

21,130

 

 

 

23,810

 

 

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

 

 

Purchase accounting adjustments from mergers with County and Community Shores

 

 

622

 

 

 

844

 

Loan servicing rights

 

 

805

 

 

 

908

 

Depreciation

 

 

534

 

 

 

605

 

Interest rate derivative contracts

 

 

1,568

 

 

 

660

 

Deferred loan fees and costs, net

 

 

75

 

 

 

15

 

Other

 

 

363

 

 

 

404

 

Total deferred tax liabilities

 

 

3,967

 

 

 

3,436

 

Net deferred tax asset (liability)

 

$

17,163

 

 

$

20,374

 

 

As of December 31, 2023, deferred tax assets included federal net operating loss carryforwards of approximately $2.2 million which was acquired through the merger with Community Shores. The loss carryforwards expire at various dates from 2031 to 2035. Deferred tax assets are recognized for net operating losses because the benefit is more likely than not to be realized. Under Code Section 382, ChoiceOne is limited to applying approximately $185,000 of net operating losses per year.