INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2022

Components of Income Tax Expense Attributable to Income from Operations

For the years ended December 31, 2022 and 2021, income tax expense attributable to income from operations consisted of the following (in thousands):


	2022		2021
Current expense:
Federal	$	5,501	$	5,732
State	883		1,033
Total current	6,384		6,765
Deferred expense/(benefit):
Federal	1,365		527
State	357		43

Total deferred	1,722		570
Income tax expense	$	8,106	$	7,335

Reconciliation of Income Tax Expense

Income tax expense differed from the amounts computed by applying the U.S. Federal statutory income tax rate to income before income tax expense as follows (in thousands):


	2022			2021
Statutory federal tax rate	21		%	21		%
Tax computed at statutory rate	$	7,747		$	7,090
Increase (reduction) resulting from:
Tax-exempt income	(434)			(380)
831(b) premium adjustment	(309)			(291)
Dividend exclusion	(7)			(8)
State taxes, net of Federal impact	988			803
Nondeductible interest expense	8			4

Other items, net	113			117
Income tax expense	$	8,106		$	7,335
Effective tax rate	22.0		%	21.7		%

Deferred Tax Assets and Deferred Tax Liabilities

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2022 and 2021, are presented below (in thousands):


	2022		2021
Deferred tax assets:
Allowance for loan losses	$	5,147	$	5,546

Depreciation	1,133		979
Deferred compensation and directors' fees	1,128		1,130
Operating lease liabilities	1,688		1,976


Purchase accounting adjustment – fixed assets	153		153

Net unrealized losses on securities available for sale	25,310		886
Defined benefit pension and other benefit plans	1,320		1,347

Nonaccrued interest	415		473
Accrued expense	117		139
Other items, net	112		127
Total gross deferred tax assets	36,523		12,756

Deferred tax liabilities:
Deferred loan fees and costs	1,358		355
Prepaid pension	4,055		3,715

Discount accretion	108		78
Core deposit intangible	1,733		1,556
REIT dividend	561		608
Operating lease right-of-use assets	1,688		1,976
Accrual for employee benefit plans	5		3
Other	219		344
Total gross deferred tax liabilities	9,727		8,635
Net deferred tax asset	$	26,796	$	4,121