Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes

Income Taxes

Note 14:     Income Taxes

The Company files a consolidated federal income tax return. As of December 31, 2023 and 2022, retained earnings included approximately $17.5 million for which no deferred income tax liability had been recognized. This amount represents an allocation of income to bad debt deductions for tax purposes only for tax years prior to 1988. If the Bank were to liquidate, the entire amount would have to be recaptured and would create income for tax purposes only, which would be subject to the then-current corporate income tax rate. The unrecorded deferred income tax liability on the above amount was approximately $4.3 million and $4.3 million at December 31, 2023 and 2022, respectively.

During the years ended December 31, 2023, 2022 and 2021, the provision for income taxes included these components:

	2023		2022		2021
	(In Thousands)
Taxes currently payable	$	14,559	$	15,769	$	16,025
Deferred income taxes		2,985		2,485		3,712
Income taxes	$	17,544	$	18,254	$	19,737

The tax effects of temporary differences related to deferred taxes shown on the statements of financial condition were:

	December 31,
	2023		2022
	(In Thousands)
Deferred tax assets
Allowance for credit losses	$	15,911	$	15,618
Liability for unfunded commitments		1,842		3,153
Interest on nonperforming loans		71		66
Accrued expenses and other		1,676		1,341
Capital loss carryforward		150		67
Unrealized loss on available-for-sale securities		13,208		15,407
Unrealized loss on securities transferred to held-to-maturity securities		16		—
Unrealized loss on active cash flow derivatives		4,255		7,695
Income recognized for tax in excess of book related to terminated cash flow derivatives		3,532		5,530
Deferred income		124		290
Difference in basis for acquired assets and liabilities		353		686
		41,138		49,853
Deferred tax liabilities
Tax depreciation in excess of book depreciation		(7,697)		(8,210)
FHLB stock dividends		(337)		(337)
Partnership tax credits		(998)		(668)
Prepaid expenses		(1,373)		(1,196)
Unrealized gain on securities transferred to held-to-maturity securities		—		(29)
Unrealized gain on terminated cash flow derivatives		(3,532)		(5,530)
Other		(277)		(235)
		(14,214)		(16,205)
Net deferred tax asset	$	26,924	$	33,648

Reconciliations of the Company’s effective tax rates, for the years indicated, from continuing operations to the statutory corporate tax rates were as follows:

	2023		2022		2021
Tax at statutory rate	21.0	%	21.0	%	21.0	%
Nontaxable interest and dividends	(0.5)		(0.5)		(0.3)
Tax credits	(2.7)		(1.6)		(1.8)
State taxes	1.7		1.8		1.3
Deferred tax rate change benefit	—		(0.6)		—
Other	1.1		(0.7)		0.7
	20.6	%	19.4	%	20.9	%

The Company and its consolidated subsidiaries have not been audited recently by the Internal Revenue Service (IRS). As a result, federal tax years through December 31, 2019 are now closed.

The Company was previously under State of Missouri income and franchise tax examinations for its 2014 and 2015 tax years. The examinations concluded with one unresolved issue related to the exclusion of certain income in the calculation of Missouri income tax. The Missouri Department of Revenue denied the Company’s administrative protest regarding the 2014 and 2015 tax years’ examinations. In June 2021, the Company filed a formal protest with the Missouri Administrative Hearing Commission (MAHC), which has special jurisdiction to hear tax matters and is similar to a trial court, to continue defending the Company’s rights and associated tax position. The Company previously filed a motion for summary decision with the MAHC and, on January 26, 2024, the MAHC granted the motion in favor of the Company, upholding its position related to the exclusion of certain income in the calculation of Missouri income tax. In February 2024, the Missouri Department of Revenue confirmed to the Company in writing that it would not exercise its right to appeal the decision to the Missouri State Supreme Court.