Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 11 – Income Taxes

Income tax provision consists of the following (dollars in thousands):

	2023			2022
Current
Federal	$	—		$	23
State		(175	)		(227	)
Deferred benefit		(278	)		262
Total income tax provision	$	(453	)	$	58

Income tax expense from continuing operations differs from the amounts computed by applying the federal income tax rate of 21% in 2023 and 2022, to earnings before federal income tax expense. These differences are primarily caused by state income taxes, net of federal tax benefit, income that is not taxable for federal and state income tax purposes, expenses that are not deductible for tax purposes and tax adjustments related to prior federal income tax returns.

Income tax provision calculated at the statutory federal income tax rate of 21% for 2023 and 2022, differs from actual income tax provision as follows (dollars in thousands):

	2023			2022
Income tax at statutory rate	$	(810	)	$	292
Non-deductible merger costs		468			—
Benefit from other permanent differences:
Earnings on life insurance assets		(52	)		(50	)
State income taxes, net of Federal tax benefit		(165	)		(116	)
Other items, net		106			(68	)
Totals	$	(453	)	$	58

Deferred tax assets and liabilities consist of the following at December 31 (dollars in thousands):

	2023			2022
Deferred tax assets:
Allowance for credit losses	$	1,458		$	1,191
Net operating loss carryforwards and certain state tax credits		1,042			582
Deferred compensation		557			549
Accrued bonus		9			318
Lease liability		500			536
Unrealized losses on AFS securities		1,840			2,317
Other, net		283			292
Total deferred tax assets		5,689			5,785
Deferred tax liabilities:
Loan origination costs		(165	)		(196	)
Depreciation		(152	)		(515	)
Right-of-use asset		(453	)		(139	)
FHLB stock dividends		(35	)		(11	)
Total deferred tax liabilities		(805	)		(861	)
Net deferred tax assets included in other assets	$	4,884		$	4,924

A valuation allowance for deferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and tax planning strategies which will create taxable income during the periods in which those temporary differences become deductible. Management considered the scheduled reversal of deferred tax liabilities, projected future taxable income, net operating loss carry-back potential, and tax planning strategies in making this assessment. Based upon the Company’s assessment of all available evidence, management determined it was more likely than not that the net deferred tax asset would be realized at December 31, 2023.

At December 31, 2023, the Company had federal operating loss carry-forwards of approximately $3.7 million, $2.8 million of which are subject to Internal Revenue Code (“IRC”) Section 382 limitations, which limit the annual use of acquired losses to $250,000 per year, and begin to expire in 2028. At December 31, 2023, the Company has recorded deferred tax assets of $778 thousand related to the Federal net operating loss carry-forwards.

It is the Company’s policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. As of December 31, 2023, and 2022, there were no material uncertain tax positions related to federal and state income tax matters. The Company does not expect the amounts of unrecognized tax benefits to significantly increase or decrease within the next 12 months.

The Company files consolidated U.S. federal and various state income/franchise tax returns. The Company is no longer subject to examination by U.S. federal taxing authorities for years before 2020 and is no longer subject to examination by state taxing authorities for years before 2019. Our federal and state tax returns have not been audited for the past seven years.