Note 10 - Income Taxes

9 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 10. INCOME TAXES

The income tax expense and the effective tax rate included in the consolidated statements of income are shown in the table below for the periods presented (dollars in thousands).

	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023
Income tax expense	$	784		$	585		$	2,993		$	2,968
Effective tax rate		12.7	%		17.4	%		17.5	%		18.4	%

During the third quarter of 2024, the Company revised its estimated 2024 annual effective tax rate to account for the projected increase in nontaxable income from BOLI in the fourth quarter of approximately $3.1 million upon receipt of death benefit proceeds.  During the first quarter of 2024, the Company surrendered approximately $8.4 million of BOLI contracts and reinvested the proceeds in higher yielding policies, which resulted in $0.3 million of income tax expense. The restructuring had an expected earn-back period of just over one year.

For the three months ended September 30, 2024 , the effective tax rate differed from the statutory tax rate of 21% primarily due to the revision of the estimated 2024 annual effective tax rate, discussed above,  tax-exempt interest income earned on certain loans and investment securities and income from BOLI. For the  nine months ended September 30, 2024 , the effective tax rate differed from the statutory tax rate of 21% primarily due to the revision of the estimated 2024 annual effective tax rate, discussed above,  tax-exempt interest income earned on certain loans and investment securities and income from BOLI, partially offset by the surrender of BOLI contracts.  For the three and nine months ended September 30, 2023, the effective tax rate differed from the statutory tax rate of 21% primarily due to  tax-exempt interest income earned on certain loans and investment securities and income from BOLI.