INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2022

INCOME TAXES

Components of Income Tax Expense

The components of income tax  expense for the two years ended December 31 were:

(Dollars in thousands)	Years Ended December 31,
	2022		2021
Current tax expense	$	513	$	235
Deferred tax expense		129		49
Total tax provision	$	642	$	284

Effective Income Tax Rate Reconciliation

(Dollars in thousands)	Years Ended December 31,
	2022			2021
Income before income taxes	$	8,962		$	6,888
Statutory tax rate		21	%		21	%
Federal tax at statutory rate		1,882			1,447
Tax-exempt interest		(189)			(208)
Net earnings on BOLI		(67)			(36)
Gain from life insurance proceeds		(80)			—
Stock-based compensation		3			(2)
Federal tax credits		(902)			(902)
Other permanent differences		(5)			(15)
Total tax provision	$	642		$	284
Effective tax rate		7.2	%		4.1	%

Schedule of Deferred Tax Assets and Liabilities

Deductible temporary differences and taxable temporary differences gave rise to a net deferred tax asset for the Company as of December 31, 2022 and December 31, 2021. The components are detailed below:

(Dollars in thousands)	Years Ended December 31,
	2022		2021
Deferred Tax Assets:
Allowance for loan losses	$	847	$	741
Deferred directors’ compensation		212		329
Employee and director benefits		252		264
Stock-based compensation		51		59
Investment in low income housing project		494		397
Fair value adjustments to acquired assets and liabilities		146		172
Tax credit carryforward		—		235
Lease liability		85		63
Unrealized loss on debt securities available for sale		1,638		1,008
Unrealized loss on debt securities held to maturity		9,536		—
Total deferred tax assets		13,261		3,268
Deferred Tax Liabilities:
Depreciation		(124)		(165)
Right of use asset		(83)		(62)
Loan origination fees and costs		(559)		(505)
Prepaid expenses		(10)		(20)
Unrealized gains on debt securities available for sale		—		—
Unrealized gain from securities impairment		(16)		(58)
Unrealized gain on derivatives		(56)		(114)
Annuity earnings		(73)		(68)
Fair value of mortgage servicing rights		(19)		(25)
Intangible assets		(26)		(37)
Goodwill		(429)		(429)
Other		(28)		(42)
Total deferred tax liabilities		(1,423)		(1,525)
Net deferred tax asset included in other assets	$	11,838	$	1,743