Income Taxes

12 Months Ended

Dec. 31, 2024

Income Taxes

Income Taxes Text Block

NOTE 10: INCOME TAXES

For the years ended December 31, 2024 and 2023 the components of income tax expense from continuing operations are

presented below.

Year ended December 31

(Dollars in thousands)

2024

2023

Current income tax expense (benefit):

Federal

$

991

(448)

State

571

(134)

Total current income tax expense (benefit)

1,562

(582)

Deferred income tax expense (benefit):

Federal

473

(293)

State

(35)

98

Total deferred income tax expense (benefit)

438

(195)

Total income tax expense (benefit)

$

2,000

(777)

Total income tax expense differs from the amounts computed by applying the statutory federal income tax rate of 21% to

earnings before income taxes. A reconciliation of the differences for the years ended December 31, 2024 and 2023, is

presented below.

2024

2023

Percent of

Percent of

pre-tax

pre-tax

(Dollars in thousands)

Amount

earnings

Amount

earnings

Earnings before income taxes

$

8,397

618

Income taxes at statutory rate

1,763

21.0

%

130

21.0

%

Tax-exempt interest

(290)

(3.5)

(493)

(79.8)

State income taxes, net of 

federal tax effect

388

4.6

(43)

(7.0)

New Markets Tax Credit

(58)

(0.7)

(356)

(57.6)

Bank-owned life insurance

(85)

(1.0)

(88)

(14.2)

Other

282

3.4

73

11.9

Total income tax expense (benefit)

$

2,000

23.8

%

(777)

(125.7)

%

At December 31, 2024 and 2023, the Company had a net deferred tax asset of $10.2 million and $10.3 million, respectively,

included in other assets on the consolidated balance sheet. The tax effects of temporary differences that give rise to

significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2024 and 2023 are presented

below.

December 31

(Dollars in thousands)

2024

2023

Deferred tax assets:

Allowance for credit losses

$

1,726

1,724

Unrealized loss on securities

9,929

9,734

Net operating loss carry-forwards

 — 

253

Tax credit carry-forwards

 — 

356

Accrued bonus 

207

185

Right of use liability

58

128

Other

99

71

Total deferred tax assets

12,019

12,451

Deferred tax liabilities:

Premises and equipment

1,212

1,315

Originated mortgage servicing rights

224

249

Right of use asset

58

122

New Markets Tax Credit investment

 — 

181

Other

333

332

Total deferred tax liabilities

1,827

2,199

Net deferred tax asset

$

10,192

10,252

A valuation allowance is recognized for a deferred tax asset if, based on the weight of available evidence, it is more-likely-

than-not that some portion of the entire deferred tax asset will not be realized. The ultimate realization of deferred tax

assets is dependent upon the generation of future taxable income during the 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 upon the level of historical taxable income and

projection for future taxable income over the periods which the temporary differences resulting in the remaining deferred

tax assets are deductible, management believes it is more-likely-than-not that the Company will realize the benefits of these

deductible differences at December 31, 2024. The amount of the deferred tax assets considered realizable, however, could

be reduced in the near term if estimates of future taxable income are reduced.

The change in the net deferred tax asset for the years ended December 31, 2024 and 2023, is presented

Year ended December 31

(Dollars in thousands)

2024

2023

Net deferred tax asset (liability):

Balance, beginning of year

$

10,252

13,769

Cumulative effect of change in accounting standard

183

276

Deferred tax expense (benefit) related to continuing operations

(438)

195

Stockholders' equity, for accumulated other comprehensive income

195

(3,988)

Balance, end of year

$

10,192

10,252

ASC 740,

Income Taxes,

 defines the threshold for recognizing the benefits of tax return positions in the financial statements

as “more-likely-than-not” to be sustained by the taxing authority. This section also provides guidance on the de-

recognition, measurement, and classification of income tax uncertainties in interim periods. As of December 31, 2024, the

Company had no unrecognized tax benefits related to federal or state income tax matters. The Company does not anticipate

any material increase or decrease in unrecognized tax benefits during 2025 relative to any tax positions taken prior to

December 31, 2024. As of December 31, 2024, the Company has accrued no interest and no penalties related to uncertain

tax positions. It is the Company’s policy to recognize interest and penalties related to income tax matters in income tax

expense. 

The Company and its subsidiaries file consolidated U.S. federal and State of Alabama income tax returns. The Company is

currently open to audit under the statute of limitations by the Internal Revenue Service and the State of Alabama for the

years ended December 31, 2021 through 2024.