Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income taxes for the years ended December 31, 2023, 2022 and 2021 are summarized as follows:

	2023		2022		2021
	(Amounts In Thousands)
Current:
Federal	$	9,575	$	11,190	$	10,383
State	2,596		3,231		2,653
Deferred:
Federal	(2,215)		(1,035)		757
State	342		(272)		214
	$	10,298	$	13,114	$	14,007

Temporary differences between the amounts reported in the consolidated financial statements and the tax basis of assets and liabilities result in deferred taxes.  Deferred tax assets and liabilities at December 31, 2023 and 2022 were as follows:

	December 31,
	2023		2022
	(Amounts In Thousands)
Deferred income tax assets:
Allowance for credit losses	$	11,745	$	10,045
Deferred compensation and unearned restricted stock	1,671		1,785
Allowance for credit losses on off-balance sheet credit exposures	1,212		1,074
Accrued expenses	932		848
Unrealized losses on investment securities	8,419		13,138
State net operating loss	1,286		1,187
Gross deferred tax assets	$	25,265	$	28,077
Valuation allowance	(1,286)		(1,187)
Deferred tax asset, net of valuation allowance	$	23,979	$	26,890
Deferred income tax liabilities:
Property and equipment	1,647		1,680
Goodwill	388		395
Prepaid expenses	495		400
Other	178		354
Gross deferred tax liabilities	$	2,708	$	2,829
Net deferred tax assets	$	21,271	$	24,061

The Company has recorded a deferred tax asset for the future tax benefits of Iowa net operating loss carry-forwards.  The net operating loss carry-forwards are generated by the Company largely from its investment in tax credit real estate properties.  The Company is required to file a separate Iowa tax return and cannot be consolidated with the Bank.  The net operating loss carry-forwards will expire, if not utilized, between 2024 and 2042.  The Company has recorded a valuation allowance to reduce the deferred tax asset attributable to the net operating loss carry-forwards.  At December 31, 2023 and 2022, the Company believes it is more likely than not that the Iowa net operating loss carry-forwards will not be realized. A valuation allowance related to the remaining deferred tax assets has not been provided because management believes it is more likely than not that the results

of future operations will generate sufficient taxable income to realize the deferred tax assets. The valuation allowance increased by $99,000 and $93,000 for the years ended December 31, 2023 and 2022, respectively.

The net change in the deferred income taxes for the years ended December 31, 2023, 2022 and 2021 is reflected in the consolidated financial statements as follows:

	Year Ended December 31,
	2023		2022		2021
	(Amounts In Thousands)
Consolidated statements of income	$	(1,873)	$	(1,307)	$	971
Consolidated statements of stockholders' equity	4,663		(13,629)		(4,008)
	$	2,790	$	(14,936)	$	(3,037)

Income tax expense for the years ended December 31, 2023, 2022 and 2021 are less than the amounts computed by applying the maximum effective federal income tax rate to the income before income taxes because of the following items:

	2023				2022				2021
	Amount		% Of Pretax Income		Amount		% Of Pretax Income		Amount		% Of Pretax Income
	(Amounts In Thousands)
Expected tax expense	$	10,180	21.0	%	$	12,782	21.0	%	$	13,039	21.0	%
Tax-exempt interest	(1,349)		(2.8)		(1,216)		(2.0)		(1,176)		(1.9)
Interest expense limitation	187		0.4		47		0.1		50		0.1
State income taxes, net of federal income tax benefit	2,321		4.8		2,337		3.8		2,265		3.7
Income tax credits	(475)		(1.0)		(475)		(0.8)		(475)		(0.8)
Other	(566)		(1.2)		(361)		(0.6)		304		0.5
	$	10,298	21.2	%	$	13,114	21.5	%	$	14,007	22.6	%

Federal income tax expense for the years ended December 31, 2023, 2022 and 2021 was computed using the consolidated effective federal tax rate.  The Company also recognized income tax expense pertaining to state franchise taxes payable individually by the subsidiary bank.  The Company files a consolidated tax return for federal purposes and separate tax returns for the State of Iowa purposes.  The tax years ended December 31, 2023, 2022, 2021 and 2020, remain subject to examination by the Internal Revenue Service.  For state tax purposes, the tax years ended December 31, 2023, 2022, 2021 and 2020, remain open for examination.  There were no material unrecognized tax benefits at December 31, 2023 and December 31, 2022.  No interest or penalties on these unrecognized tax benefits has been recorded.  As of December 31, 2023, the Company does not anticipate any significant increase or decrease in unrecognized tax benefits during the twelve month period ending December 31, 2024.