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INCOME TAXES
 12 Months Ended
Dec. 31, 2021
INCOME TAXES [Abstract]  
INCOME TAXES
12. INCOME TAXES


The provision for income taxes consists of the following (in thousands):

 
Year Ended December 31,
  
   
2021
    
2020
    
2019
  
Currently payable
  
$
5,510
    
$
4,896
    
$
3,503
  
Deferred tax liability (asset)
    
689
      
367
      
317
Provision for income taxes
  
$
6,199
    
$
5,263
    
$
3,820
  


The following temporary differences gave rise to the net deferred tax asset and liabilities at December 31, 2021 and 2020, respectively (in thousands):

Deferred tax assets:  
2021
    
2020
  
Allowance for loan losses
  
$
4,712
    
$
5,135
  
Deferred compensation
    
491
      
520
  
Merger & acquisition costs
    
1
      
2
  
Allowance for losses on available-for-sale securities
    
4
      
15
  
Pension and other retirement obligation
    
360
      
599
  
Unrealized loss on interest rate swap
    
-
      
2
  
Interest on non-accrual loans
    
795
      
778
  
Incentive plan accruals
    
536
      
489
  
Other real estate owned
    
16
      
16
  
Low income housing tax credits
    
137
      
131
  
NOL carry forward
    
1,226
      
1,321
  
Right of use asset
    
686
      
482
  
Accrued vacation
    
168
      
187
  
Other
    
159
      
224
  
Total
  
$
9,291
    
$
9,901
  

Deferred tax liabilities:
   2021
    2020
 
Premises and equipment
  
$
(559
)
  
$
(612
)
Investment securities accretion
    
(90
)
    
(68
)
Loan fees and costs
    
(644
)
    
(333
)
Goodwill and core deposit intangibles
    
(2,309
)
    
(2,293
)
Mortgage servicing rights
    
(246
)
    
(215
)
Unrealized gains on available-for-sale securities
    
(81
)
    
(1,612
)
Unrealized gains on equity securities
     (61 )     -  
 Unrealized gains on interest rate swap     (401 )     -  
Right of use asset
    
(685
)
    
(480
)
Other
    
(133
)
    
(245
)
Total
    
(5,209
)
    
(5,858
)
Deferred tax (liability) asset, net
  
$
4,082
    
$
4,043
  



No valuation allowance was established at December 31, 2021 and 2020, due to the Company’s ability to carryback to taxes paid in previous years and certain tax strategies, coupled with the anticipated future taxable income as evidenced by the Company’s earnings potential.


The total provision for income taxes is different from that computed at the statutory rates due to the following items (dollars in thousands):

 
Year Ended December 31,
  
   
2021
    
2020
    
2019
  
Provision at statutory rates on pre-tax income
  
$
7,413
    
$
6,377
    
$
4,895
  
Effect of tax-exempt income
    
(764
)
    
(936
)
    
(920
)
Low income housing tax credits
    
(141
)
    
(141
)
    
(141
)
Bank owned life insurance
    
(384
)
    
(146
)
    
(131
)
Nondeductible interest
    
44
      
44
      
52
  
Nondeductible merger and acquisition expenses
    
-
      
32
      
38
  
Other items
    
31
      
33
      
27
  
Provision for income taxes
  
$
6,199
    
$
5,263
    
$
3,820
  
Statutory tax rates
    
21
%
    
21
%
    
21
%
Effective tax rates
    
17.6
%
    
17.3
%
    
16.4
%



The Company prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. With limited exception, the Company’s federal and state income tax returns for taxable years through 2017 have been closed for purposes of examination by the federal and state taxing authorities.

Investments in Qualified Affordable Housing Projects


As of December 31, 2021 and 2020, the Company was invested in five and four partnerships, respectively, that provide affordable housing. The balance of the investments, which is included within other assets in the Consolidated Balance Sheet, was $288,000 and $216,000 as of December 31, 2021 and 2020, respectively. Investments purchased prior to January 1, 2015, are accounted for utilizing the effective yield method. As of December 31, 2021, the Company has $141,000 of tax credits remaining that will be recognized over one year for partnerships entered into prior to January 1, 2021. During 2021, the Company entered into an additional partnership that is expected to generate tax credits of $2,951,000 that will be utilized over the next twelve years. Tax credits of $141,000 were recognized as a reduction of tax expense during 2021, 2020 and 2019. Included within other expenses on the Consolidated Statement of Income was $108,000 of amortization of the investments in qualified affordable housing projects for 2021, 2020 and 2019, respectively.