Federal Income Taxes

12 Months Ended

Dec. 31, 2023

Federal Income Taxes [Abstract]

Federal Income Taxes

Note 14. Federal Income Taxes

The temporary differences which give rise to significant portions of deferred tax assets and liabilities at December 31 are as follows:

(Dollars in thousands)
Deferred Tax Assets	2023		2022
Allowance for loan losses	$	3,440	$	3,021
Deferred compensation		939		916
Purchase accounting		20		19
Accumulated other comprehensive loss		10,882		13,633
Lease liabilities		1,032		1,309
Other		596		280
Total gross deferred tax assets		16,909		19,178
Deferred Tax Liabilities
Depreciation		3,023		1,079
Right-of-use asset		1,002		1,281
Joint ventures and partnerships		43		45
Pension		694		711
Deferred loan fees and costs, net		346		432
Total gross deferred tax liabilities		5,108		3,548
Net deferred tax asset	$	11,801	$	15,630

In assessing the realizability of deferred tax assets, Management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, Management believes it is more likely than not that the Bank will realize the benefits of these deferred tax assets other than those for which a valuation allowance has been recorded.

The components of income taxes attributable to income from operations were as follows:

	For the Years Ended December 31
(Dollars in thousands)	2023		2022
Current tax expense (benefit)	$	1,015	$	1,385
Deferred tax expense (benefit)		1,140		1,172
Income tax provision	$	2,155	$	2,557

For the years ended December 31, 2023 and 2022, the income tax provisions are different from the tax expense which would be computed by applying the Federal statutory rate to pretax operating earnings. The Federal statutory rate was 21% for 2023 and 2022. A reconciliation between the tax provision at the statutory rate and the tax provision at the effective tax rate is as follows:

	For the Years Ended December 31
(Dollars in thousands)	2023		2022
Tax provision at statutory rate	$	3,308	$	3,674
Income on tax-exempt loans and securities		(949)		(1,113)
Investment in solar tax credit		(325)		—
Nondeductible interest expense relating to carrying tax-exempt obligations		215		47
Income from bank owned life insurance		(88)		(86)
Stock option compensation		(1)		5
Other, net		(5)		30
Income tax provision	$	2,155	$	2,557
Effective income tax rate		13.7%		14.6%

The Corporation recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense for all periods presented. No penalties or interest were recognized in 2023 or 2022. The Corporation had no uncertain tax positions at December 31, 2023. The Corporation is no longer subject to U.S. Federal and state examinations by tax authorities for the years before 2020.