LCNB CORP Income Taxes Disclosure
NOTE 13 - INCOME TAXES
The provision for federal income taxes consists of (in thousands):
| 2024 | 2023 | 2022 | ||||||||||
| Income taxes currently payable | $ | 518 | 2,955 | 5,163 | ||||||||
| Deferred income tax provision (benefit) | 1,951 | (323 | ) | (345 | ) | |||||||
| Provision for income taxes | $ | 2,469 | 2,632 | 4,818 | ||||||||
A reconciliation between the statutory income tax and the Company's effective tax rate follows:
| 2024 | 2023 | 2022 | ||||||||||
| Statutory tax rate | 21.0 | % | 21.0 | % | 21.0 | % | ||||||
| Increase (decrease) resulting from - | ||||||||||||
| Tax exempt interest | (0.7 | )% | (0.9 | )% | (0.6 | )% | ||||||
| Tax exempt income on bank owned life insurance | (2.2 | )% | (1.6 | )% | (0.8 | )% | ||||||
| Captive insurance premium income | (1.5 | )% | (0.8 | )% | (0.9 | )% | ||||||
| Affordable housing tax credit limited partnerships | (2.0 | )% | (2.0 | )% | (0.8 | )% | ||||||
| Nondeductible merger-related expenses | 0.9 | % | 1.7 | % | — | % | ||||||
| Other, net | 0.0 | % | (0.2 | )% | — | % | ||||||
| Effective tax rate | 15.5 | % | 17.2 | % | 17.9 | % | ||||||
Deferred tax assets and liabilities, included in the Consolidated Balance Sheets with other assets, consist of the following at December 31 (in thousands):
| 2024 | 2023 | |||||||
| Deferred tax assets: | ||||||||
| Allowance for credit losses | $ | 2,530 | 2,217 | |||||
| Net unrealized losses on investment securities available-for-sale | 5,101 | 5,923 | ||||||
| Fair value adjustment on loans acquired from mergers | 4,981 | 5,895 | ||||||
| Benefit plans | 203 | 277 | ||||||
| Deferred compensation | 556 | 580 | ||||||
| Minimum pension liability | — | 15 | ||||||
| Operating lease liabilities | 1,198 | 1,242 | ||||||
| Net operating loss carryforwards | 4,551 | — | ||||||
| Tax credit carryforwards | 718 | — | ||||||
| Other | 420 | 478 | ||||||
| 20,258 | 16,627 | |||||||
| Deferred tax liabilities: | ||||||||
| Depreciation of premises and equipment | (1,527 | ) | (1,395 | ) | ||||
| Amortization of intangibles | (3,588 | ) | (2,808 | ) | ||||
| Mortgage servicing rights | (653 | ) | (865 | ) | ||||
| Prepaid expenses | (575 | ) | (525 | ) | ||||
| FHLB stock dividends | (589 | ) | (501 | ) | ||||
| Operating lease right-of-use assets | (1,198 | ) | (1,243 | ) | ||||
| Fair value adjustment on time deposits acquired from mergers | — | (222 | ) | |||||
| Deferred gain on loans sold | (305 | ) | (305 | ) | ||||
| Other, net | (130 | ) | (198 | ) | ||||
| (8,565 | ) | (8,062 | ) | |||||
| Net deferred tax assets (liabilities) | $ | 11,693 | 8,565 | |||||
As of December 31, 2024 and 2023 there were no unrecognized tax benefits and the Company does not anticipate the total amount of unrecognized tax benefits will significantly change within the next twelve months. There were no amounts recognized for interest and penalties in the Consolidated Statements of Income for the three-year period ended December 31, 2024.
As of December 31, 2024, as a result of the acquisitions of CNNB and EFBI, the Company has federal net operating loss carryforwards of $547,000, which expire beginning in 2027, and $21,079,000 that do not expire. The use of the federal net operating loss carryforwards are limited by Internal Revenue Code Section 382, but they are currently expected to be utilized before their respective expiration dates.
The Company is no longer subject to examination by federal tax authorities for years before 2021.
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.