Note 6 - INCOME TAXES

9 Months Ended

Sep. 30, 2024

INCOME TAXES

INCOME TAXES

NOTE 6 – INCOME TAXES

A reconciliation of the expected federal income tax expense to the income tax expense included in the consolidated statements of income is as follows for the three and nine months ended September 30, 2024 and 2023:

	For the Three Months Ended September 30,								For the Nine Months Ended September 30,
	2024				2023				2024				2023
			% of				% of				% of				% of
			Pretax				Pretax				Pretax				Pretax
	Amount		Income		Amount		Income		Amount		Income		Amount		Income
	(dollars in thousands)								(dollars in thousands)
Computed "expected" tax expense	$	6,264	21.0	%	$	5,661	21.0	%	$	18,773	21.0	%	$	18,751	21.0	%
Tax exempt income, net		(4,204)	(14.1)			(3,705)	(13.7)			(11,965)	(13.4)			(10,103)	(11.3)
Bank-owned life insurance		(171)	(0.6)			(376)	(1.4)			(975)	(1.1)			(700)	(0.8)
State income taxes, net of federal benefit, current year		1,084	3.6			955	3.5			3,186	3.6			3,383	3.8
Tax credits		(26)	(0.1)			(202)	(0.7)			(77)	(0.1)			(411)	(0.5)
Income from tax credit equity investments		(546)	(1.8)			(449)	(1.7)			(1,639)	(1.8)			(1,340)	(1.5)
Excess tax benefit on stock options exercised and restricted stock awards vested		(310)	(1.0)			(7)	—			(834)	(0.9)			(451)	(0.5)
Other		(46)	(0.1)			(37)	(0.2)			(698)	(0.8)			(540)	(0.6)
Federal and state income tax expense	$	2,045	6.9	%	$	1,840	6.8	%	$	5,771	6.5	%	$	8,589	9.6	%

Effective January 1, 2024, the Company made an election under ASU 2023-02 to account for its LIHTC investments using the proportional amortization method under newly adopted accounting guidance.  Under the proportional amortization method, the Company applies a practical expedient for its LIHTC investments and amortizes the initial cost of the qualifying investments in proportion to the income tax credits received in the current period as compared to the total income tax credits expected to be received over the life of the investment.  For LIHTC investments, the Company amortized the initial cost of qualifying investments in proportion to the income tax credits and other income tax benefits received in the current period.

The following table summarizes the impact to the Consolidated Statements of Operations relative to the Company’s tax credit programs for which it has elected to apply the proportional amortization method of accounting:

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2024		June 30, 2024		September 30, 2023		September 30, 2024		September 30, 2023
	(dollars in thousands)						(dollars in thousands)
Tax credits recognized	$	2,159	$	2,115	$	1,462	$	6,478	$	4,366
Other tax benefits recognized		671		613		515		2,013		1,537
Amortization		(2,076)		(2,092)		(1,203)		(6,229)		(3,783)
Net benefit included in income tax		754		636		774		2,262		2,120
Other income		—		—		—		—		—
Allocated income on investments		—		—		—		—		—
Net benefit included in noninterest income		—		—		—		—		—
Net benefit included in the Consolidated Statements of Operations	$	754	$	636	$	774	$	2,262	$	2,120

The Company did not recognize impairment losses resulting from the forfeiture or ineligibility of income tax credits or other circumstances during the three and nine months ending September 30, 2024 and 2023.