Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes

Income Taxes

(16)Income Taxes

Allocation of federal and state income taxes between current and deferred provisions is as follows:

(Dollars in thousands)	2023		2022
Current
Federal	$	1,767	$	2,911
State		568		1,317
		2,335		4,228
Deferred
Federal		(396)		990
State		(129)		100
		(525)		1,090
Total	$	1,810	$	5,318

The federal statutory corporate tax rate for the years ended December 31, 2023 and 2022 was 21%. A reconciliation of the tax provision based on the statutory corporate rate on pretax income and the provision for taxes as shown in the accompanying Consolidated Statements of Income is as follows:

(Dollars in thousands)	2023			2022
Income tax expense at statutory rate	$	1,436		$	4,510
Income tax effect of:
State income taxes, net of federal income tax benefits		628			1,079
Other tax-exempt income		(179)			(166)
Share-based compensation		12			9
Meal and entertainment expenses		53			49
Non-deductible executive compensation		70			119
Recovery on bank-owned life insurance		—			(216)
Other		(210)			(66)
Total income tax expense	$	1,810		$	5,318
Effective income tax rate		26.47	%		24.76	%

The components of income taxes payable (receivable) are as follows:

	December 31,
(Dollars in thousands)	2023		2022
Current taxes (receivable) payable:
Federal	$	(932)	$	(519)
State		588		1,357
	$	(344)	$	838
Deferred taxes receivable:
Federal	$	(1,313)	$	(707)
State		(1,144)		(936)
	$	(2,457)	$	(1,643)

The current tax receivable at December 31, 2023, is primarily due to an overpayment of federal estimated taxes.  The estimated tax payment for the fourth quarter of 2023 was calculated by annualizing the year-to-date federal tax liability through September 30, 2023.  The actual federal tax liability through December 31, 2023, was lower than the projections made through September 30, 2023.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:

	December 31,
(Dollars in thousands)	2023		2022
Deferred tax assets:
Hawaii franchise tax	$	117	$	377
Allowance for credit/loan losses		1,364		541
Employee benefit plans		2,672		2,714
Equity incentive plan		107		141
Deferred compensation		22		199
Net lease liability		1,312		212
Unrealized loss on securities available for sale		637		725
Other		11		16
		6,242		4,925
Deferred tax liabilities:
Deferred loan costs		2,665		2,601
Premises and equipment		273		254
FHLB stock dividends		126		125
Prepaid expense		653		226
Premiums on loans sold		68		76
		3,785		3,282
Net deferred tax assets	$	2,457	$	1,643

Deferred tax assets and liabilities at December 31, 2023 and 2022 were calculated using federal corporate tax rates of 21%.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced. There was no valuation allowance for deferred tax assets as of December 31, 2023 and 2022.