Note 7 - Income Taxes

6 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(7) Income Taxes

Components of income tax expense from operations follows:

	Three months ended					Six months ended
	June 30,					June 30,
(in thousands)	2023			2022		2023			2022
Current income tax expense:
Federal	$	8,086		$	3,393	$	13,280		$	3,607
State		1,687			614		2,364			614
Total current income tax expense		9,773			4,007		15,644			4,221
Deferred income tax expense:
Federal		(1,641	)		2,622		(224	)		3,464
State		(157	)		918		687			1,307
Total deferred income tax expense		(1,798	)		3,540		463			4,771
Change in valuation allowance		-			-		-			-
Total income tax expense	$	7,975		$	7,547	$	16,107		$	8,992

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

	Three months ended						Six months ended
	June 30,						June 30,
	2023			2022			2023			2022
U.S. federal statutory income tax rate		21.0	%		21.0	%		21.0	%		21.0	%
State income taxes, net of federal benefit		3.6			3.5			3.5			3.5
Excess tax benefit from stock-based compensation arrangements		0.2			(1.6	)		(0.5	)		(2.4	)
Change in cash surrender value of life insurance		(0.6	)		0.9			(0.7	)		1.1
Tax credits		(1.2	)		(0.5	)		(0.4	)		(0.7	)
Tax exempt interest income		(0.5	)		(0.6	)		(0.5	)		(0.8	)
Non-deductible merger expenses		-			0.1			-			0.3
Insurance captive		(0.3	)		(0.2	)		(0.3	)		(0.4	)
Other, net		0.2			(0.7	)		-			(1.1	)
Effective tax rate		22.4	%		21.9	%		22.1	%		20.5	%

Current state income tax expense for 2023 and 2022 represents tax owed to the state 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 June 30, 2023 and December 31, 2022, 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 2018.