INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Income tax expense (benefit) for each of the periods shown below consisted of the following:

	Year ended December 31,		Year ended December 31,
	2023		2022
Current tax provision
Federal	$	5,081	$	3,565
State	448		1,749
	5,529		5,314
Deferred tax provision (benefit)
Federal	(1,373)		355
State	(105)		151
	(1,478)		506
Valuation allowance	1,822		—
Total	$	5,873	$	5,820

The provision for income taxes differs from the amount of income tax determined by applying statutory federal income tax rates to pretax income as result of the following differences:

	Year ended December 31,				Year ended December 31,
	2023				2022
	Amount		Rate		Amount		Rate
Tax expense at statutory rate	$	3,976	21.0	%	$	4,952	21.0	%
State income taxes, net of federal	271		1.4	%	1,501		6.4	%
Tax credits	—		—	%	(514)		(2.2)	%
Bank owned life insurance	(146)		(0.8)	%	(135)		(0.6)	%
Tax exempt interest	(52)		(0.3)	%	(59)		(0.3)	%
Valuation allowance	1,822		9.6	%	—		—	%
Other	2		0.1	%	75		0.4	%
Total	$	5,873	31.0	%	$	5,820	24.7	%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following is a summary of the significant components of the Company’s deferred tax assets and liabilities as of December 31, 2023 and December 31, 2022, respectively:

	Year ended December 31,		Year ended December 31,
	2023		2022
Deferred tax assets:
Allowance for credit losses	$	6,104	$	4,934
Deferred loan costs/fees	632		591
Restricted stock	184		243
Economic performance accruals	769		871
Other real estate owned	230		188
Loan discounts	304		375
Lease liability	426		535
Net unrealized losses on securities available for sale	6,702		6,697
Other	22		44
Deferred tax assets	$	15,373	$	14,478
Deferred tax liabilities:
Office properties and equipment	(2,132)		(2,286)
Federal Home Loan Bank stock	(119)		(129)
Core deposit intangible	(852)		(1,019)
Net gain on equity securities	(762)		(710)
Prepaid expenses	(230)		(250)
Mortgage servicing rights	(977)		(1,172)
Leases; right of use asset	(373)		(467)
Deferred tax liabilities	$	(5,445)	$	(6,033)
Valuation allowance	(1,822)		—
Net deferred tax assets	$	8,106	$	8,445

The Company regularly reviews the carrying amount of its deferred tax assets to determine if the establishment of a valuation allowance is necessary, as further discussed in Note 1 “Nature of Business and Summary of Significant Accounting Policies”, above. As of December 31, 2023, management determined a valuation allowance of $1,822 was necessary due to changes in the realization of deferred tax assets due to a Wisconsin change in the non-taxation of loans under $5 million reducing the effective tax rate. At December 31, 2022, management determined that no valuation allowance was necessary.

The Company’s income tax returns are subject to review and examination by federal, state and local government authorities. As of December 31, 2023, years open to examination by the U.S. Internal Revenue Service include taxable years ended December 31, 2020 to present. The years open to examination by state and local government authorities varies by jurisdiction.

The tax effects from uncertain tax positions can be recognized in the consolidated financial statements, provided the position is more likely than not to be sustained on audit, based on the technical merits of the position. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than fifty percent likelihood of being realized, upon ultimate settlement with the relevant tax authority. The Company applied the foregoing accounting standard to all of its tax positions for which the statute of limitations remained open as of the date of the accompanying consolidated financial statements.

The Company’s policy is to recognize interest and penalties related to income tax issues as components of other non-interest expense. The Company recognized no material expense on income tax related interest or penalties during any of the periods presented.