INCOME TAXES

12 Months Ended

Dec. 31, 2023

INCOME TAXES [Abstract]

INCOME TAXES

13. INCOME TAXES

The provision for income taxes consists of the following (in thousands):

	Year Ended December 31,
	2023		2022			2021
Currently payable	$	3,109	$	6,471		$	5,510
Deferred tax liability (asset)		595		(36	)		689
Provision for income taxes	$	3,704	$	6,435		$	6,199

The following temporary differences gave rise to the net deferred tax asset and liabilities at December 31, 2023 and 2022, respectively (in thousands):

	2023		2022
Deferred tax assets:
Allowance for credit losses	$	5,868	$	4,581
Deferred compensation		597		559
Merger & acquisition costs		-		1
Allowance for losses on available-for-sale securities		147		9
Pension and other retirement obligation		166		146
Interest on non-accrual loans		1,263		974
Incentive plan accruals		662		503
Other real estate owned		16		32
Unrealized losses on available-for-sale securities		7,506		9,972
Low income housing tax credits		44		138
NOL carry forward		2,468		1,134
Unrealized losses on equity securities		24		-
Non-PCD loan interest rate		4,795		-
Right of use asset		2,349		1,053
Accrued vacation		281		157
Other		428		164
Total	$	26,614	$	19,423

Deferred tax liabilities:
Premises and equipment	$	(679	)	$	(492	)
Investment securities accretion		(432	)		(240	)
Loan fees and costs		(859	)		(685	)
Goodwill and core deposit intangibles		(2,889	)		(2,332	)
Mortgage servicing rights		(201	)		(205	)
Unrealized gains on equity securities		-			(16	)
Unrealized gains on interest rate swap		(1,143	)		(1,443	)
Borrowings fair value adjustment		(511	)		-
Lease liability		(2,334	)		(1,047	)
Other		(227	)		(77	)
Total		(9,275	)		(6,537	)
Deferred tax asset, net	$	17,339		$	12,886

No valuation allowance was established at December 31, 2023 and 2022, due to the certain tax strategies and anticipated future taxable income as evidenced by the Company’s earnings potential.

The total provision for income taxes is different from that computed at the statutory rates due to the following items (dollars in thousands):

	Year Ended December 31,
	2023			2022			2021
Provision at statutory rates on pre-tax income	$	4,514		$	7,450		$	7,413
Effect of tax-exempt income		(895	)		(835	)		(764	)
Low income housing tax credits		(585	)		(141	)		(141	)
Low income housing expense		399			-			-
Bank owned life insurance		(263	)		(179	)		(384	)
Nondeductible interest		251			74			44
Nondeductible merger and acquisition expenses		247			61			-
Change in tax rate		-			-			-
Other items		36			5			31
Provision for income taxes	$	3,704		$	6,435		$	6,199
Statutory tax rates		21	%		21	%		21	%
Effective tax rates		17.2	%		18.1	%		17.6	%

The Company prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. With limited exception, the Company’s federal and state income tax returns for taxable years through 2019 have been closed for purposes of examination by the federal and state taxing authorities.