Note I - Income Taxes

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE I - INCOME TAXES:

Deferred taxes (or deferred charges) as of December 31, 2022 and 2021, included in other assets, were as follows (in thousands):

December 31,	2022			2021
Deferred tax assets:
Allowance for loan losses	$	701		$	695
Employee benefit plans' liabilities		3,376			3,240
Unrealized loss on available for sale securities, charged from equity		10,029
Loss on credit impairment of securities		356			356
Earned retiree health benefits plan liability		1,126			1,098
General business and AMT credits		1,683			1,525
Tax net operating loss carryforward					1,575
Other		610			523
Valuation allowance		(13,090	)		(6,889	)
Deferred tax assets		4,791			2,123
Deferred tax liabilities:
Unrealized gain on available for sale securities, charged from equity					3
Unearned retiree health benefits plan asset		470			257
Bank premises and equipment		1,870			1,575
Other		5			288
Deferred tax liabilities		2,345			2,123
Net deferred taxes	$	2,446		$

Income taxes consist of the following components (in thousands):

Years Ended December 31,	2022			2021			2020
Current	$	15		$	62		$
Deferred:
Federal		1,188			1,482			(809	)
Change in valuation allowance		(3,634	)		(1,482	)		809
Total deferred		(2,446	)
Totals	$	(2,431	)	$	62		$

Income taxes amounted to less than the amounts computed by applying the U.S. Federal income tax rate of 21.0% for 2022, 2021 and 2020 income before income taxes. The reasons for these differences are shown below (in thousands):         

	2022						2021						2020
	Tax			Rate			Tax			Rate			Tax			Rate
Taxes computed at statutory rate	$	1,367			21		$	1,815			21		$	(578	)		(21	)
Increase (decrease) resulting from:
Tax-exempt interest income		(198	)		(3	)		(187	)		(2	)		(127	)		(5	)
Income from BOLI		(93	)		(1	)		(91	)		(1	)		(148	)		(5	)
Federal tax credits		(45	)		(1	)
Other		172			2			6						44			2
Other changes in valuation allowance		(3,634	)		(55	)		(1,481	)		(17	)		809			29
Total income tax expense	$	(2,431	)	$	(37	)	$	62		$	1		$

During 2022, the Company recorded current and deferred income tax expense (benefit) of $15,000 and $(2,446,000), respectively or a net income tax benefit of $2,431,000. During 2021 the Company recorded current and deferred income tax expense of $62,000 and $0, respectively. During 2020 the Company recorded no income tax expense or benefit.

During 2020 the Company recorded no income tax expense or benefit. On December 22, 2017, the President signed into law The Tax Cuts and Jobs Act (the “Act”). In addition to reducing U.S. corporate income tax rates from 34% to 21%, the Act repealed the alternative minimum tax (“AMT”) regime for tax years beginning after December 31, 2017. For tax years beginning in 2018, 2019 and 2020, the AMT credit carryforward could be utilized to offset regular tax with any remaining AMT carryforwards eligible for a refund of 50%. Any remaining AMT credit carryforwards will become fully refundable beginning in the 2021 tax year. The Act also limits NOL usage to 80% of taxable income, which resulted in the Company recording income tax expense for 2021.

A valuation allowance is recognized against deferred tax assets when, based on the consideration of all available positive and negative evidence using a more likely than not criteria, it is determined that all or a portion of these tax benefits may not be realized. This assessment requires consideration of all sources of taxable income available to realize the deferred tax asset including taxable income in prior carry-back years, future reversals of existing temporary differences, tax planning strategies and future taxable income exclusive of reversing temporary differences and carryforwards. The Company incurred losses on a cumulative basis for the three-year period ended December 31, 2014, which is considered to be significant negative evidence.

The positive evidence considered in support was insufficient to overcome this negative evidence. As a result, the Company established a full valuation allowance for its net deferred tax asset in the amount of $8,140,000 as of December 31, 2014. As of December 31, 2021, the valuation allowance was $6,888,984.

Based on the Company’s projections, as of December 31, 2022, the Company determined that it was more likely than not that it would realize a certain amount of its deferred tax assets. Prior to that time, the Company had recorded a valuation allowance against its net deferred tax asset. As a result of the Company’s projections, as of December 31, 2022, the Company recorded a net deferred tax asset of $2,446,000.

The Company intends to maintain this valuation allowance until it determines it is more likely than not that the asset can be realized through current and future taxable income.

The Company has reviewed its income tax positions and specifically considered the recognition and measurement requirements of the benefits recorded in its financial statements for tax positions taken or expected to be taken in its tax returns. The Company currently has no unrecognized tax benefits that, if recognized, would favorably affect the income tax rate in future periods.