INCOME TAXES

12 Months Ended

Dec. 31, 2024

INCOME TAXES

INCOME TAXES

NOTE 9 — INCOME TAXES

The current and deferred components of the income tax (benefit) expense consisted of the following:

(Dollars in thousands)

	2024		2023
Federal
Current	$	18	$	431
Deferred		(63)		253
Income tax (benefit) expense	$	(45)	$	684

The following is a reconciliation between the income tax (benefit) expense and the amount of income taxes which would have been provided at the statutory rate of 21%:

(Dollars in thousands)

	2024				2023
	Amount		Rate		Amount		Rate
Federal income tax at statutory rate	$	(2,782)	(21.0)	%	$	1,311	21.0	%
Tax-exempt income		(20)	(0.2)			(106)	(1.7)
Low-income housing credits		(875)	(6.6)			(484)	(7.7)
Bank owned life insurance income		(140)	(1.1)			(130)	(2.1)
Goodwill impairment		3,761	28.4			—	—
Prior year tax adjustments		6	0.1			82	1.3
Other		5	0.1			11	0.2
Income tax (benefit) expense and rate	$	(45)	(0.3)	%	$	684	11.0	%

The components of the net deferred tax asset at December 31, 2024 and 2023 are as follows:

(Dollars in thousands)

	2024		2023
Deferred Tax Assets:
Net unrealized losses on debt securities available-for-sale and derivatives	$	6,852	$	7,880
Allowance for credit losses		1,617		1,454
Provision for unfunded commitments		21		35
Deferred compensation		179		218
Contributions		2		4
Accrued rent expense		109		106
Operating lease liabilities		405		415
Finance lease liabilities		—		—
Limited partnership investments		538		322
Impairment loss on securities		4		4
Deferred health insurance		55		53
Capital and net operating loss carry forwards		367		285
Valuation allowance related to state net operating losses		(367)		(285)
Total		9,782		10,491
Deferred Tax Liabilities:
Loan fees and costs		187		225
Net unrealized gains on marketable equity securities		259		231
Operating lease right-of-use assets		405		415
Accumulated depreciation		649		438
Accretion		491		172
Mortgage servicing rights		61		58
Derivatives remeasurement		5		—
Intangibles		—		257
Total		2,057		1,796
Net Deferred Tax Asset	$	7,725	$	8,695

A valuation allowance for deferred tax assets was recorded in the amount of $367,000 and $285,000 at December 31, 2024 and 2023, respectively. The valuation allowance relates to state net operating loss carryforwards for which realizability is uncertain. At December 31, 2024 and 2023, the Corporation had state net operating loss carryforwards, net of a valuation allowance of $0, which would be available to offset future state taxable income, and expire at various dates through 2044.

In assessing the realizability of deferred tax assets, management considers whether 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 during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible and tax planning strategies, management believes it is more likely than not that the Corporation will realize the benefits of these deferred tax assets, net of any valuation allowance at December 31, 2024.

The Corporation did not have any uncertain tax positions at December 31, 2024 and 2023.

The Corporation and its subsidiary file a consolidated federal income tax return. The Corporation is no longer subject to examination by Federal or State taxing authorities for the years before 2021.