INCOME TAXES

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

INCOME TAXES

13. INCOME TAXES

The net deferred tax asset at December 31, 2023 and 2022 represents the following temporary difference components:

	December 31,		December 31,
(In Thousands)	2023		2022
Deferred tax assets:
Unrealized holding losses on securities	$	10,335	$	13,391
Allowance for credit losses on loans		4,230		3,648
Purchase accounting adjustments on loans		470		938
Deferred compensation		1,352		1,149
Operating leases liability		787		907
Deferred loan origination fees		731		779
Net operating loss carryforward		541		659
Accrued incentive compensation		463		354
Other deferred tax assets		1,316		1,115
Total deferred tax assets		20,225		22,940
Deferred tax liabilities:
BOLI surrender		950		0
Defined benefit plans - ASC 835		119		129
Bank premises and equipment		291		298
Core deposit intangibles		544		633
Right-of-use assets from operating leases		787		907
Other deferred tax liabilities		93		89
Total deferred tax liabilities		2,784		2,056
Deferred tax asset, net	$	17,441	$	20,884

The provision for income taxes includes the following:

(In Thousands)	2023		2022		2021
Currently payable	$	5,499	$	5,998	$	8,386
Tax expense resulting from allocations of certain tax benefits to equity or as a reduction in other assets		0		134		128
Deferred		836		(400)		(1,381)
Total provision	$	6,335	$	5,732	$	7,133

A reconciliation of income tax at the statutory rate to the Corporation’s effective rate is as follows:

	2023			2022			2021
(Dollars In Thousands)	Amount		%	Amount		%	Amount		%
Expected provision	$	6,401	21.0	$	6,794	21.0	$	7,914	21.0
Tax-exempt interest income		(964)	(3.2)		(1,029)	(3.2)		(921)	(2.4)
Increase in cash surrender value and other income from life insurance, net		(586)	(1.9)		(103)	(0.3)		(118)	(0.3)
ESOP dividends		(143)	(0.5)		(130)	(0.4)		(120)	(0.3)
Initiated surrender of bank-owned life insurance		950	3.1		0	0.0		0	0.0
State income tax, net of Federal benefit		329	1.1		296	0.9		375	1.0
Nondeductible interest expense		283	0.9		87	0.3		52	0.1
Other, net		65	0.3		(183)	(0.6)		(49)	(0.1)
Effective income tax provision	$	6,335	20.8	$	5,732	17.7	$	7,133	18.9

The Corporation has a net operating loss (“NOL”) available to be carried forward against future federal taxable income. Availability of the NOL does not expire; however, the amount that may be offset against taxable income is limited to approximately $563,000 per year and further limited annually to no more than 80% of taxable income without regard to the NOL. At December 31, 2023, the unused amount of the NOL is $2.6 million.

The Corporation has no unrecognized tax benefits, nor pending examination issues related to tax positions taken in preparation of its income tax returns. With limited exceptions, the Corporation is no longer subject to examination by the Internal Revenue Service for years prior to 2020.