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INCOME TAXES | 12 Months Ended
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Dec. 31, 2023
INCOME TAXES [Abstract] |
INCOME TAXES | 13. INCOME TAXES The provision for income taxes consists of the following (in thousands):
|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Currently payable |  | $ | 3,109 |  |  | $ | 6,471 |  |  | $ | 5,510 |
Deferred tax liability (asset) |  |  | 595 |  |  |  | (36 | ) |  |  | 689 |
Provision for income taxes |  | $ | 3,704 |  |  | $ | 6,435 |  |  | $ | 6,199 |
The following temporary differences gave rise to the net deferred tax asset and liabilities at December 31, 2023 and 2022, respectively (in thousands):
|  | 2023 |  |  | 2022 |
Deferred tax assets: |  |  |  |  |  |
Allowance for credit losses |  | $ | 5,868 |  |  | $ | 4,581 |
Deferred compensation |  |  | 597 |  |  |  | 559 |
Merger & acquisition costs |  |  | - |  |  |  | 1 |
Allowance for losses on available-for-sale securities |  |  | 147 |  |  |  | 9 |
Pension and other retirement obligation |  |  | 166 |  |  |  | 146 |
Interest on non-accrual loans |  |  | 1,263 |  |  |  | 974 |
Incentive plan accruals |  |  | 662 |  |  |  | 503 |
Other real estate owned |  |  | 16 |  |  |  | 32 |
Unrealized losses on available-for-sale securities |  |  | 7,506 |  |  |  | 9,972 |
Low income housing tax credits |  |  | 44 |  |  |  | 138 |
NOL carry forward |  |  | 2,468 |  |  |  | 1,134 |
Unrealized losses on equity securities |  |  | 24 |  |  |  | - |
Non-PCD loan interest rate |  |  | 4,795 |  |  |  | - |
Right of use asset |  |  | 2,349 |  |  |  | 1,053 |
Accrued vacation |  |  | 281 |  |  |  | 157 |
Other |  |  | 428 |  |  |  | 164 |
Total |  | $ | 26,614 |  |  | $ | 19,423 |
Deferred tax liabilities: |  |  |  |  |  |
Premises and equipment |  | $ | (679 | ) |  | $ | (492 | )
Investment securities accretion |  |  | (432 | ) |  |  | (240 | )
Loan fees and costs |  |  | (859 | ) |  |  | (685 | )
Goodwill and core deposit intangibles |  |  | (2,889 | ) |  |  | (2,332 | )
Mortgage servicing rights |  |  | (201 | ) |  |  | (205 | )
Unrealized gains on equity securities |  |  | - |  |  |  | (16 | )
Unrealized gains on interest rate swap |  |  | (1,143 | ) |  |  | (1,443 | )
Borrowings fair value adjustment |  |  | (511 | ) |  |  | - |
Lease liability |  |  | (2,334 | ) |  |  | (1,047 | )
Other |  |  | (227 | ) |  |  | (77 | )
Total |  |  | (9,275 | ) |  |  | (6,537 | )
Deferred tax asset, net |  | $ | 17,339 |  |  | $ | 12,886 |
No valuation allowance was established at December 31, 2023 and 2022, due to the certain tax strategies and 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, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Provision at statutory rates on pre-tax income |  | $ | 4,514 |  |  | $ | 7,450 |  |  | $ | 7,413 |
Effect of tax-exempt income |  |  | (895 | ) |  |  | (835 | ) |  |  | (764 | )
Low income housing tax credits |  |  | (585 | ) |  |  | (141 | ) |  |  | (141 | )
Low income housing expense |  |  | 399 |  |  |  | - |  |  |  | - |
Bank owned life insurance |  |  | (263 | ) |  |  | (179 | ) |  |  | (384 | )
Nondeductible interest |  |  | 251 |  |  |  | 74 |  |  |  | 44 |
Nondeductible merger and acquisition expenses |  |  | 247 |  |  |  | 61 |  |  |  | - |
Change in tax rate |  |  | - |  |  |  | - |  |  |  | - |
Other items |  |  | 36 |  |  |  | 5 |  |  |  | 31 |
Provision for income taxes |  | $ | 3,704 |  |  | $ | 6,435 |  |  | $ | 6,199 |
Statutory tax rates |  |  | 21 | % |  |  | 21 | % |  |  | 21 | %
Effective tax rates |  |  | 17.2 | % |  |  | 18.1 | % |  |  | 17.6 | %
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 2019 have been closed for purposes of examination by the federal and state taxing authorities.

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