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Note 12 - Income Taxes
 12 Months Ended
Dec. 31, 2023
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

(12)        INCOME TAXES

 

The Company and its corporate subsidiaries file consolidated tax returns. The components of consolidated income tax expense for the years ended December 31, 2023, 2022 and 2021 were as follows:

 

(In thousands)

 

2023

  

2022

  

2021

 
             

Current

 $2,946  $2,438  $2,371 

Deferred

  (698)  (118)  (131)
             

Totals

 $2,248  $2,320  $2,240 

 

The reconciliation of income tax expense with the amount which would have been provided at the federal statutory rate of 21% for the years ended December 31, 2023, 2022, and 2021 follows:

 

(In thousands)

 

2023

  

2022

  

2021

 
             

Provision at federal statutory tax rate

 $3,161  $2,989  $2,872 

State income tax-net of federal tax benefit

  178   301   266 

Tax-exempt interest income

  (733)  (709)  (608)

Bank-owned life insurance income

  (43)  (42)  (46)

Captive insurance net premiums

  (126)  (169)  (200)

Investment in tax credit entities

  (228)  (63)  (58)

Other

  39   13   14 

Totals

 $2,248  $2,320  $2,240 

Effective tax rate

  14.9%  16.3%  16.4%

 

 

Significant components of the deferred tax assets and liabilities as of December 31, 2023 and 2022 were as follows:

 

(In thousands)

 

2023

  

2022

 
         

Deferred tax assets (liabilities):

        

Deferred compensation plans

 $61  $73 

Unrealized loss on securities available for sale

  7,247   10,905 

ACL - loans

  1,845   1,600 

ACL - unfunded commitments

  31   - 

Unrealized loss on equity securities

  160   112 

Restricted stock

  26   41 

Interest on nonaccrual loans

  128   140 

Deferred income

  160   221 

State tax credit carryforwards

  381   - 

Other

  7   9 

Deferred tax assets

  10,046   13,101 
         

Depreciation

  (921)  (927)

Deferred loan fees and costs

  (236)  (308)

FHLB stock dividends

  (37)  (37)

Prepaid expenses

  (246)  (407)

Acquisition purchase accounting adjustments

  (270)  (317)

Other

  (58)  (30)

Deferred tax liabilities

  (1,768)  (2,026)
         

Net deferred tax asset

 $8,278  $11,075 

 

At December 31, 2023, the Company had state tax credit carryforwards of $381,000 that may be carried forward nine years.

 

At December 31, 2023 and 2022, the Company had no liability for unrecognized income tax benefits related to uncertain tax positions and does not anticipate any increase in the liability for unrecognized tax benefits during the next twelve months. The Company believes that its income tax positions would be sustained upon examination and does not anticipate any adjustments that would result in a material change to its financial position or results of operations. The Company files consolidated U.S. federal income tax returns and Indiana and Kentucky state income tax returns. Returns filed in these jurisdictions for tax years ended on or after December 31, 2020 are subject to examination by the relevant taxing authorities. Each entity included in the consolidated federal, Indiana and Kentucky state income tax returns filed by the Company are charged or given credit for the applicable tax as though separate returns were filed.

 

Retained earnings of the Bank at December 31, 2023 and 2022 include approximately $909,000 for which no deferred federal income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions as of December 31, 1987 for tax purposes only. Reduction of such allocated amounts for purposes other than tax bad debt losses, including redemption of bank stock, excess dividends or loss of “bank” status, would create income for tax purposes only, subject to the then-current corporate income tax rate. The unrecorded deferred liability on these amounts was approximately $191,000 at December 31, 2023 and 2022.