Note 8 - Income Taxes

3 Months Ended

Mar. 31, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(8) Income Taxes

Components of income tax expense (benefit) from operations follows:

	Three months ended
	March 31,
(in thousands)	2022		2021
Current income tax expense:
Federal	$	214	$	3,493
State		-		522
Total current income tax expense		214		4,015
Deferred income tax expense (benefit):
Federal		842		837
State		389		609
Total deferred income tax expense (benefit)		1,231		1,446
Change in valuation allowance		-		-
Total income tax expense	$	1,445	$	5,461

An analysis of the difference between the statutory and ETRs from operations follows:

	Three months ended
	March 31,
	2022			2021
U.S. federal statutory income tax rate		21.0	%		21.0	%
State income taxes, net of federal benefit		3.3			3.2
Excess tax benefit from stock-based compensation arrangements		(5.9	)		(3.0	)
Change in cash surrender value of life insurance		1.8			(0.4	)
Tax credits		(1.7	)		(0.5	)
Tax exempt interest income		(1.6	)		(0.1	)
Non-deductible merger expenses		1.1			-
Insurance captive		(0.9	)		-
Other, net		(1.7	)		(0.8	)
Effective tax rate		15.4	%		19.4	%

Current state income tax expense represents tax owed to the states of Kentucky, Indiana and Illinois. Ohio state bank taxes are based on capital levels and are recorded as other non-interest expense.

GAAP provides guidance on financial statement recognition and measurement of tax positions taken, or expected to be taken, in tax returns. If recognized, tax benefits would reduce tax expense and accordingly, increase net income. The amount of unrecognized tax benefits may increase or decrease in the future for various reasons including adding amounts for current year tax positions, expiration of open income tax returns due to statutes of limitation, changes in management’s judgment about the level of uncertainty, status of examination, litigation and legislative activity and addition or elimination of uncertain tax positions. As of March 31, 2022 and December 31, 2021, the gross amount of unrecognized tax benefits was immaterial to Bancorp’s consolidated financial statements. Federal and state income tax returns are subject to examination for the years after 2017.