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Note 12 - Income Taxes
 12 Months Ended
Dec. 31, 2024
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, 2024, 2023 and 2022 were as follows:

 

(In thousands)

  

2024

    

2023

    

2022

  
                         

Current

   $ 2,767     $ 2,946     $ 2,438  

Deferred

     (551 )     (698 )     (118 )
                         

Totals

   $ 2,216     $ 2,248     $ 2,320  

 

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, 2024, 2023, and 2022 follows:

 

(In thousands)

  

2024

    

2023

    

2022

  
                         

Provision at federal statutory tax rate

   $ 2,975     $ 3,161     $ 2,989  

State income tax-net of federal tax benefit

     120       178       301  

Tax-exempt interest income

     (608 )     (733 )     (709 )

Bank-owned life insurance income

     (47 )     (43 )     (42 )

Captive insurance net premiums

     -       (126 )     (169 )

Investment in tax credit entities

     (288 )     (228 )     (63 )

Other

     64       39       13  

Totals

   $ 2,216     $ 2,248     $ 2,320  

Effective tax rate

     15.6 %     14.9 %     16.3 %

 

Significant components of the deferred tax assets and liabilities as of December 31, 2024 and 2023 were as follows:

 

(In thousands)

  

2024

    

2023

  
                 

Deferred tax assets (liabilities):

                

Deferred compensation plans

   $ 51     $ 61  

Unrealized loss on securities available for sale

     6,701       7,247  

ACL - loans

     2,297       1,845  

ACL - unfunded commitments

     32       31  

Accrued Expenses

     58       -  

Unrealized loss on equity securities

     252       160  

Restricted stock

     18       26  

Interest on nonaccrual loans

     143       128  

Deferred income

     102       160  

State tax credit carryforwards

     305       381  

Other

     6       7  

Deferred tax assets

     9,965       10,046  
                 

Depreciation

     (890 )     (921 )

Deferred loan fees and costs

     (285 )     (236 )

FHLB stock dividends

     (37 )     (37 )

Prepaid expenses

     (219 )     (246 )

Acquisition purchase accounting adjustments

     (228 )     (270 )

Other

     (23 )     (58 )

Deferred tax liabilities

     (1,682 )     (1,768 )
                 

Net deferred tax asset

   $ 8,283     $ 8,278  

 

At December 31, 2024 and 2023, the Company had state tax credit carryforwards of $305,000 and $381,000, respectively, that may be carried forward nine years and expire in 2032 if unused.

 

At December 31, 2024 and 2023, 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, 2021 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, 2024 and 2023 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, 2024 and 2023.