Note 6 - INCOME TAXES

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Federal and State Income Taxes

NOTE 6 – INCOME TAXES

A reconciliation of the expected federal income tax expense to the income tax expense included in the consolidated statements of income is as follows for the three months ended March 31, 2024 and 2023:

	For the Three Months Ended March 31,
	2024				2023
			% of				% of
			Pretax				Pretax
	Amount		Income		Amount		Income
	(dollars in thousands)
Computed "expected" tax expense	$	5,859	21.0	%	$	6,287	21.0	%
Tax exempt income, net		(3,775)	(13.5)			(3,216)	(10.7)
Bank-owned life insurance		(182)	(0.7)			(148)	(0.5)
State income taxes, net of federal benefit, current year		1,014	3.6			1,189	4.0
Tax credits		(86)	(0.3)			(177)	(0.6)
Income from tax credit equity investments		(596)	(2.1)			(413)	(1.4)
Excess tax benefit on stock options exercised and restricted stock awards vested		(470)	(1.7)			(398)	(1.3)
Other		(592)	(2.1)			(342)	(1.2)
Federal and state income tax expense	$	1,172	4.2	%	$	2,782	9.3	%

Effective January 1, 2024, the Company made an election to account for its LIHTC investments using the proportional amortization method under newly adopted accounting guidance.  Under the proportional amortization method, the Company applies a practical expedient for its LIHTC investments and amortizes the initial cost of the qualifying investments in proportion to the income tax credits received in the current period as compared to the total income tax credits expected to be received over the life of the investment.  For LIHTC investments, the Company amortized the initial cost of qualifying investments in proportion to the income tax credits and other income tax benefits received in the current period.

The following table summarizes the impact to the Consolidated Statements of Operations relative to the Company’s tax credit programs for which it has elected to apply the proportional amortization method of accounting:

	For the Three Months Ended
	March 31, 2024		December 31, 2023		March 31, 2023
	(dollars in thousands)
Tax credits recognized	$	2,204	$	5,185	$	1,120
Other tax benefits recognized		729		2,037		508
Amortization		(2,061)		(5,090)		(964)
Net benefit included in income tax		872		2,132		664
Other income		—		—		—
Allocated income on investments		—		—		—
Net benefit included in noninterest income		—		—		—
Net benefit included in the Consolidated Statements of Operations	$	872	$	2,132	$	664

The Company did not recognize impairment losses resulting from the forfeiture or ineligibility of income tax credits or other circumstances during the quarters ending March 31, 2024, December 31, 2023 and March 31, 2023.