XML 39 R25.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income tax expense consists of the following:
 For the Year Ended December 31,
 202320222021
 (In Thousands)
Current:
Federal$7,759 $9,174 $6,965 
State233 2,987 3,087 
Current tax expense7,992 12,161 10,052 
Deferred:
Federal(716)(733)1,333 
State2,836 (42)(110)
Deferred tax expense (benefit)2,120 (775)1,223 
Total income tax expense$10,112 $11,386 $11,275 
Deferred income tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax basis. Deferred tax assets and liabilities are measured using enacted tax rates to apply to taxable income in the period in which the temporary differences are expected to be recovered or settled. Net deferred tax assets are included in accrued interest receivable and other assets in the Consolidated Balance Sheets.
The significant components of the Corporation’s deferred tax assets and liabilities were as follows:
 December 31, 2023December 31, 2022
 (In Thousands)
Deferred tax assets:
Allowance for credit losses$8,730 $6,267 
Deferred compensation2,094 2,342 
State net operating loss carryforwards875 265 
Write-down of repossessed assets10 11 
Non-accrual loan interest95 47 
Capital loss carryforwards22 21 
Unrealized losses on securities4,715 5,263 
Share-based compensation788 725 
Other284 125 
Total deferred tax assets before valuation allowance17,613 15,066 
Valuation allowance(3,339)— 
Total deferred tax assets14,274 15,066 
Deferred tax liabilities:
Leasing and fixed asset activities1,854 2,197 
Loan servicing asset381 393 
Other2,531 765 
Total deferred tax liabilities4,766 3,355 
Net deferred tax asset$9,508 $11,711 
The tax effects of unrealized gains and losses on securities are components of other comprehensive income. A reconciliation of the change in net deferred tax assets to deferred tax expense is as follows:
 December 31, 2023December 31, 2022December 31, 2021
 (In Thousands)
Change in net deferred tax assets$(2,203)$5,536 $(1,042)
Deferred taxes allocated to other comprehensive income548 (4,761)(181)
Cumulative change in accounting principle
(465)— — 
Deferred income tax benefit (expense)$(2,120)$775 $(1,223)
Realization of the deferred tax asset over time is dependent upon the Corporation generating sufficient taxable earnings in future periods. In making the determination that the realization of the deferred tax was more likely than not, the Corporation considered several factors including its recent earnings history, its expected earnings in the future, appropriate tax planning strategies, and expiration dates associated with operating loss carryforwards.
On July 5, 2023, the Wisconsin legislature enacted 2023 Wisconsin Act 19 (the “Act”). The Act contains a provision that provides financial institutions with a state tax-exemption for interest, fees, and penalties earned on qualifying loans. For the exemption to apply, the loan must be $5 million or less, for primarily a business or agricultural purpose, and made to borrowers residing or located in Wisconsin. The exemption first applies to taxable years beginning after December 31, 2022 and applies to loans on the books as of January 1, 2023 and to new loans made after that meet the qualifications. The Corporation currently projects that its Wisconsin state taxable income will be significantly reduced and/or eliminated in the future as a result of this provision. The Corporation reversed $2.8 million in income tax expense which had been recorded during 2023 and recognized a date of enactment valuation allowance for Wisconsin deferred tax assets of $2.8 million, resulting in a one-time $2.8 million increase in tax expense.
Deferred tax assets are deferred tax consequences attributable to deductible temporary differences and carryforwards. After the deferred tax asset has been measured using the applicable enacted tax rate and provisions of the enacted tax law, it is then necessary to assess the need for a valuation allowance. A valuation allowance is needed when, based on the weight of the
available evidence, it is more likely than not that some portion of the deferred asset will not be realized. The realization of deferred tax assets is dependent on the existence of taxable income of the appropriate character (e.g., ordinary or capital) within the carry-back and carry-forward periods available under tax law, which would consider future reversals of existing taxable temporary differences and available tax planning strategies. As of December 31, 2023, the state deferred tax valuation allowance was $3.3 million, reducing our Wisconsin deferred tax assets to $0. The Corporation had state net operating loss carryforwards of approximately $16.4 million and $6.3 million at December 31, 2023 and 2022, respectively, which it does not expect to offset due to having no expected future state taxable income. The Corporation fully utilized its established deferred tax assets and Wisconsin state net operating losses and therefore no valuation allowance established as of December 31, 2022.
The provision for income taxes differs from that computed at the federal statutory corporate tax rate as follows: 
 Year Ended December 31,
 202320222021
 (Dollars in Thousands)
Income before income tax expense$47,139 $52,244 $47,030 
Tax expense at statutory federal rate of 21% applied to income before income tax expense
$9,899 $10,971 $9,876 
State income tax, net of federal effect(52)2,337 2,351 
Tax-exempt security and loan income, net of TEFRA adjustments(856)(704)(710)
Change in valuation allowance3,349 — — 
Bank-owned life insurance(313)(468)(297)
Tax credits, net(1,045)(338)— 
Share-based compensation(159)(392)— 
Section 162(m) limitation123 118 — 
Other(834)(138)55 
Total income tax expense$10,112 $11,386 $11,275 
Effective tax rate21.45 %21.79 %23.97 %
There were no uncertain tax positions outstanding as of December 31, 2023 and 2022. As of December 31, 2023, tax years remaining open for the State of Wisconsin tax were 2019 through 2022. Federal tax years that remained open were 2020 through 2022. As of December 31, 2023, there were also no unrecognized tax benefits that are expected to significantly increase or decrease within the next twelve months.