INCOME TAXES

12 Months Ended

Dec. 31, 2022

INCOME TAXES

INCOME TAXES

14.INCOME TAXES:

Income tax expense is summarized as follows:

(Dollar amounts in thousands)	2022		2021		2020
Federal:
Currently payable	$	11,016	$	7,978	$	7,886
Deferred		2,277		1,488		1,188
		13,293		9,466		9,074
State:
Currently payable		2,485		3,080		2,422
Deferred		873		80		196
		3,358		3,160		2,618
TOTAL	$	16,651	$	12,626	$	11,692

The reconciliation of income tax expense with the amount computed by applying the statutory federal income tax rate of 21% to income before income taxes is summarized as follows:

(Dollar amounts in thousands)	2022		2021		2020
Federal income taxes computed at the statutory rate	$	18,430	$	13,779	$	13,763
Add (deduct) tax effect of:
Tax exempt income		(3,439)		(2,745)		(2,643)
ESOP dividend deduction		(103)		(101)		(98)
State tax, net of federal benefit		2,653		2,496		2,068
General business tax credits		(674)		(716)		(1,648)
Other, net		(216)		(87)		250
TOTAL	$	16,651	$	12,626	$	11,692

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2022 and 2021, are as follows:

(Dollar amounts in thousands)	2022		2021
Deferred tax assets:
Other than temporary impairment	$	752	$	764
Net unrealized losses on retirement plans		5,614		6,033
Net unrealized loss on available for sale securities		39,242		—
Loan loss provisions		10,054		12,476
Unfunded commitments		537		764
Deferred compensation		1,957		2,367
Compensated absences		709		739
Post-retirement benefits		1,051		1,284
Lease liability		1,572		1,597
Purchase accounting		114		1,333
Other		3,018		2,770
GROSS DEFERRED ASSETS		64,620		30,127
Deferred tax liabilities:
Net unrealized gains on securities available-for-sale		—		(4,269)
Depreciation		(660)		(1,611)
Mortgage servicing rights		(458)		(515)
Pensions		(1,120)		(1,647)
Right-of-use asset		(1,566)		(1,591)
Intangibles		(6,093)		(5,717)
FHLB stock dividends		(32)		(32)
Other		(4,118)		(4,113)
GROSS DEFERRED LIABILITIES		(14,047)		(19,495)
NET DEFERRED TAX ASSETS	$	50,573	$	10,632

Unrecognized Tax Benefits — A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(Dollar amounts in thousands)	2022		2021		2020
Balance at January 1	$	808	$	867	$	825
Additions based on tax positions related to the current year		59		9		114
Additions based on tax positions related to prior years		—		—		—
Reductions due to the statute of limitations		(9)		(68)		(72)
Balance at December 31	$	858	$	808	$	867

Of this total, $858 thousand represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. The Corporation does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next 12 months.

The total amount of interest and penalties recorded in the income statement for the years ended December 31, 2022, 2021 and 2020 was an expense increase of $18 thousand, an increase of $21 thousand, and an increase of $11 thousand, respectively. The amount accrued for interest and penalties at December 31, 2022, 2021 and 2020 was $103 thousand, $85 thousand and $64 thousand, respectively.

The Corporation and its subsidiaries are subject to U.S. federal income tax as well as income tax of the states of Indiana, Illinois, Kentucky, Tennessee, and other states. The Corporation is no longer subject to examination by taxing authorities for years before 2019.