Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 10 — Income Taxes

The provision for income taxes included in the accompanying consolidated statements of operations consists of the following components:

	Years ended December 31,
	2021			2020
Current tax expense (benefit):
Federal	$	—		$	86
State		—			—
Total current tax expense (benefit)		—			86
Deferred tax expense:
Federal		(49	)		589
State		(15	)		127
Valuation allowance		—			934
Total deferred tax expense		(64	)		1,650
Provision (credit) for income taxes	$	(64	)	$	1,736

A summary of the sources of differences between income taxes at the federal statutory rate and the provision (credit) for income taxes follows: 

	Years ended December 31,
	2021						2020
	Amount			% of Pretax Income			Amount			% of Pretax Income
Reconciliation of statutory to effective rates:
Federal income taxes at statutory rate	$	5			21.00	%	$	641			21.00	%
Adjustments for:
Increase in cash value of life insurance		(85	)		(357.00	%)		(84	)		(2.75	%)
Change in valuation allowance		—			0.00	%		934			30.60	%
Other, net		16			67.20	%		245			8.03	%
Total income tax expense (benefit)	$	(64	)		(268.80	%)	$	1,736			56.88	%

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The net deferred tax asset in the accompanying balance sheet includes the following amounts of deferred tax assets and liabilities: 

	As of December 31,
	2021			2020
Deferred tax assets:
Allowance for loan losses	$	780		$	735
Deferred compensation		1,070			859
Accrued employee benefits		102			122
NOL and charitable contribution carryforwards		3,442			3,492
Premises and equipment		40			6
ESOP release of shares		32			17
Other		82			57
Total deferred tax assets	$	5,548		$	5,288
Deferred tax liabilities:
Loan fees	$	179		$	48
Unrealized gain on available for sale securities		52			420
Mortgage servicing rights		556			491
FHLB stock dividends		26			26
Total deferred tax liabilities	$	813		$	985
Net deferred tax asset/liability		4,735			4,303
Valuation allowance		(934	)		(934	)
Net deferred tax asset	$	3,801		$	3,369

Income (benefit) tax expense was ($64) for the year ended December 31, 2021 and $1.7 million for the year ended December 31, 2020. As of December 31, 2021 and December 31, 2020, the Company had a deferred tax asset valuation allowance of $934, reducing our net deferred tax assets to $3.8 million and $3.4 million, at each respective date.

Deferred tax assets are deferred tax consequences attributable to deductible temporary differences and carryforwards. After the deferred tax asset has been measured using the applicable enacted tax rate and provisions of the enacted tax law, it is then necessary to assess the need for a valuation allowance. A valuation allowance is needed when, based on the weight of the available positive and negative evidence, it is more likely than not that some portion of the deferred asset will not be realized. As required by generally accepted accounting principles, available evidence is weighted heavily on cumulative losses, with less weight placed on future projected profitability. Realization of the deferred tax asset is dependent on whether there will be sufficient future taxable income, including available tax strategies of the appropriate character in the period during which deductible temporary differences reverse or within the carryforward periods available under tax law.

The Company has federal loss carryforwards of approximately $9.7 million as of December 31, 2021. Of this amount, $1.8 million represents a tax loss carryforward from the 2019 tax year has an indefinite carryforward period due to the Tax Cuts and Jobs Act of 2017. The remaining $7.9 million of losses begin to expire in 2030. The Company also has $416 of charitable contribution carryforwards that may be applied against future taxable income and begin to expire in 2024.

The Company had an ownership change during 2021 which resulted in an annual limitation on the future utilization of both Federal and Wisconsin net operating loss (NOL) carryforwards.

The Company has state net operating loss carryforwards totaling approximately $19.9 million that may be applied against future state taxable income and begin to expire in 2024 as of December 31, 2021. The Company also has $419 of charitable contribution carryforwards that may be applied against future taxable income which begin to expire in 2024.

With few exceptions, the Company is generally no longer subject to examinations by taxing authorities for years before 2018 for federal tax examinations and 2017 for state tax examinations.