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INCOME TAXES | 12 Months Ended
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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.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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