Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes consists of the following:

	2024		2023		2022
Current Federal	$	17,521	$	13,067	$	13,049
Current State	3,306		1,934		1,763
Deferred Federal	(766)		2,602		1,868
Deferred State	227		156		671
Total	$	20,288	$	17,759	$	17,351

Effective tax rates differ from the federal statutory rate of 21% for 2024, 2023 and 2022 applied to income before income taxes due to the following:

	2024		2023		2022
Statutory Rate Times Pre-tax Income	$	21,861	$	21,766	$	20,827
Add (Subtract) the Tax Effect of:
Income from Tax-exempt Loans and Investments	(4,008)		(4,951)		(5,223)
Non-deductible Merger Costs	50		—		177
State Income Tax, Net of Federal Tax Effect	2,782		1,651		1,923
General Business Tax Credits	(1,190)		(1,128)		(1,038)
Amortization of Tax Credit Investments	1,136		1,101		1,040
Company Owned Life Insurance	(432)		(363)		(476)
Other Differences	89		(317)		121
Total Income Taxes	$	20,288	$	17,759	$	17,351

The net deferred tax asset/(liability) at December 31 consists of the following:

	2024		2023
Deferred Tax Assets:
Allowance for Credit Losses	$	11,088	$	10,888
Lease Liability (Operating Leases)	1,121		1,313
Unrealized Loss on Securities	58,803		57,882
Deferred Compensation and Employee Benefits	933		1,026
Other-than-temporary Impairment	246		245
Accrued Expenses	1,248		1,224
Pension and Postretirement Plans	182		182
Other Real Estate Owned	41		41
Non-Accrual Loan Interest Income	355		449
Net Operating Loss Carryforward	488		650
Other	1,046		879
Total Deferred Tax Assets	75,551		74,779
Deferred Tax Liabilities:
Depreciation	(3,095)		(3,416)
Leasing Activities, Net	(13,039)		(12,926)
FHLB Stock Dividends	(432)		(455)
Prepaid Expenses	(136)		(154)
Intangibles	(2,061)		(2,376)
Deferred Loan Fees	(996)		(954)
Mortgage Servicing Rights	(44)		(51)
Right of Use Asset (Operating Leases)	(1,080)		(1,274)
Business Combination Fair Value Adjustments	(640)		(478)
Other	(1,198)		(1,325)
Total Deferred Tax Liabilities	(22,721)		(23,409)
Valuation Allowance	—		—
Net Deferred Tax Asset/(Liability)	$	52,830	$	51,370

Under the Internal Revenue Code, through 1996, three acquired banking companies, which are now a part of the Company’s single banking subsidiary, were allowed a special bad debt deduction related to additions to tax bad debt reserves established for the purpose of absorbing losses. The acquired banks were formerly known as River Valley Financial Bank (acquired in March 2016), Peoples Community Bank (acquired in October 2005) and First American Bank (acquired in January 1999). Subject to certain limitations, these banks were permitted to deduct from taxable income an allowance for bad debts based on a percentage of taxable income before such deductions or actual loss experience. Each of the banks generally computed its annual addition to its bad debt reserves using the percentage of taxable income method; however, due to certain limitations in 1996, the banks were only allowed a deduction based on actual loss experience.

Retained earnings at December 31, 2024, include approximately $5,095 for which no provision for federal income taxes has been made. This amount represents allocations of income for allowable bad debt deductions. Reduction of amounts so allocated for purposes other than tax bad debt losses will create taxable income, which will be subject to the then current corporate income tax rate. It is not contemplated that amounts allocated to bad debt deductions will be used in any manner to create taxable income. The unrecorded deferred income tax liability on the above amount at December 31, 2024 was approximately $1,070.

As of December 31, 2024, the Company had Kentucky net operating loss carryforwards of $12,346, which expire in years ranging from 2029 through 2040. These net operating loss carryforwards are expected to be fully utilized before their expiration dates.

Unrecognized Tax Benefits

The Company had no unrecognized tax benefits as of December 31, 2024, 2023, and 2022, and did not recognize any increase in unrecognized benefits during 2024 relative to any tax positions taken in 2024. Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is the Company’s policy to record such accruals in its income tax expense accounts; no such accruals existed as of December 31, 2024, 2023, and 2022. The Company and its corporate subsidiaries file a consolidated U.S. Federal income tax return, which is subject to examination for all years after 2020. The Company and its corporate subsidiaries file combined/unitary returns in various states, which are subject to examination for all years after 2020.