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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

Note 16 — Income Taxes

Income tax expense consists of the following:

 

 

For the Year Ended December 31,

 

 

2024

 

 

2023

 

 

2022

 

 

(In Thousands)

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

8,783

 

 

$

7,759

 

 

$

9,174

 

State

 

 

1,635

 

 

 

233

 

 

 

2,987

 

Current tax expense

 

 

10,418

 

 

 

7,992

 

 

 

12,161

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

(1,263

)

 

 

(716

)

 

 

(733

)

State

 

 

(2,250

)

 

 

2,836

 

 

 

(42

)

Deferred tax (benefit) expense

 

 

(3,513

)

 

 

2,120

 

 

 

(775

)

Total income tax expense

 

$

6,905

 

 

$

10,112

 

 

$

11,386

 

 

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, 2024

 

 

December 31, 2023

 

 

(In Thousands)

 

Deferred tax assets:

 

 

 

 

 

 

Allowance for credit losses

 

$

9,820

 

 

$

8,730

 

Deferred compensation

 

 

2,511

 

 

 

2,094

 

State net operating loss carryforwards

 

 

687

 

 

 

875

 

Write-down of repossessed assets

 

 

31

 

 

 

10

 

Non-accrual loan interest

 

 

222

 

 

 

95

 

Capital loss carryforwards

 

 

—

 

 

 

22

 

Unrealized losses on securities

 

 

4,136

 

 

 

4,715

 

Share-based compensation

 

 

761

 

 

 

788

 

Other

 

 

154

 

 

 

284

 

Total deferred tax assets before valuation allowance

 

 

18,322

 

 

 

17,613

 

Valuation allowance

 

 

(1,568

)

 

 

(3,339

)

Total deferred tax assets

 

 

16,754

 

 

 

14,274

 

Deferred tax liabilities:

 

 

 

 

 

 

Leasing and fixed asset activities

 

 

1,361

 

 

 

1,854

 

Loan servicing asset

 

 

328

 

 

 

381

 

Other

 

 

2,466

 

 

 

2,531

 

Total deferred tax liabilities

 

 

4,155

 

 

 

4,766

 

Net deferred tax asset

 

$

12,599

 

 

$

9,508

 

 

Realization of the deferred tax assets is dependent upon the Corporation generating sufficient taxable earnings prior to the expiration of net operating loss carryforwards. Management performs an analysis to determine if a valuation allowance against deferred tax assets is required in accordance with U.S. GAAP.

 

For Wisconsin state deferred tax assets, management determined that it was probable that some or all of the deferred tax assets would not be utilized within the applicable carry-forward period. The primary driver is the 2023 Wisconsin Act 19 which contains a provision that provides financial institutions with a state tax-exemption for interest, fees, and penalties earned on qualifying small-business loans. In 2024, management recorded a $1.7 million partial release of a state deferred tax asset valuation allowance due to changes in projected taxable income based on revised state taxation guidance and 2023 state tax return actual results. As of December 31, 2024, the state deferred tax valuation allowance was $1.6 million, reducing our Wisconsin deferred tax assets to $2.1 million. 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 $5.7 million and $16.4 million at December 31, 2024 and 2023, respectively.

 

For federal and other U.S. states, management determined that it was not required to establish a valuation allowance against the December 31, 2024 or 2023 deferred tax assets in accordance with U.S. GAAP since it was more likely than not that the deferred tax assets will be fully utilized in future periods.

 

 

The provision for income taxes differs from that computed at the federal statutory corporate tax rate as follows:

 

 

Year Ended December 31,

 

 

2024

 

 

2023

 

 

2022

 

 

(Dollars in Thousands)

 

Income before income tax expense

 

$

51,150

 

 

$

47,139

 

 

$

52,244

 

Tax expense at statutory federal rate of 21% applied to
   income before income tax expense

 

$

10,741

 

 

$

9,899

 

 

$

10,971

 

State income tax, net of federal effect

 

 

1,441

 

 

 

(52

)

 

 

2,337

 

Tax-exempt security and loan income, net of TEFRA
   adjustments

 

 

(1,201

)

 

 

(856

)

 

 

(704

)

Change in valuation allowance

 

 

(1,888

)

 

 

3,349

 

 

 

—

 

Bank-owned life insurance

 

 

(346

)

 

 

(313

)

 

 

(468

)

Tax credits, net

 

 

(1,787

)

 

 

(1,045

)

 

 

(338

)

Share-based compensation

 

 

(251

)

 

 

(159

)

 

 

(392

)

Section 162(m) limitation

 

 

106

 

 

 

123

 

 

 

118

 

Other

 

 

90

 

 

 

(834

)

 

 

(138

)

Total income tax expense

 

$

6,905

 

 

$

10,112

 

 

$

11,386

 

Effective tax rate

 

 

13.50

%

 

 

21.45

%

 

 

21.79

%

 

There were no uncertain tax positions outstanding as of December 31, 2024 and 2023. As of December 31, 2024, tax years remaining open for the State of Wisconsin tax were 2020 through 2023. Federal tax years that remained open were 2021 through 2023. As of December 31, 2024, there were also no unrecognized tax benefits that are expected to significantly increase or decrease within the next twelve months.