Income Taxes

9 Months Ended

Sep. 30, 2024

Income Taxes

Income Taxes

9. Income Taxes:

Deferred taxes (or deferred charges) as of September 30, 2024 and December 31, 2023, included in other assets, were as follows (in thousands):

	9/30/2024		12/31/2023		12/31/2023
				As originally		As adjusted
Deferred tax assets:				reported
Allowance for credit losses	$	813	$	695	$	833
Employee benefit plans' liabilities		4,022		3,434		4,079
Unrealized loss on available for sale securities, charged from equity		7,325		8,341		9,909
Loss on credit impairment of securities		423		356		423
Earned retiree health benefits plan liability		1,276		1,074		1,276
General business and AMT credits		159		210		1,033
State income tax net operating loss carryforward		930		—		1,111
Other		306		344		279
Valuation allowance		(423)		(11,534)		(15,617)
Deferred tax assets		14,831		2,920		3,326
Deferred tax liabilities:
Unearned retiree health benefits plan asset		469		395		469
Bank premises and equipment		2,112		1,759		2,088
Other		—		10		13
Deferred tax liabilities		2,581		2,164		2,570
Net deferred taxes	$	12,250	$	756	$	756

During the preparation of its third quarter 2024 consolidated financial statements the Company determined that the disclosures of deferred income tax assets and liabilities in the footnotes to its December 31, 2023, consolidated financial statements improperly excluded deferred state income taxes.  The above amounts as of December 31, 2023 have been restated to include deferred federal and state income taxes. The correction of this disclosure error had no impact on the recorded amount of net deferred taxes in the Company’s December 31, 2023 consolidated statement of condition.  

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Current	$	52	$	(374)	$	384	$	318
Deferred		1,045		—		1,115		—
Change in valuation allowance		(15,194)		702		(15,194)		1,268
Total deferred		(14,149)		702		(14,079)		1,268
Totals	$	(14,097)	$	328	$	(13,695)	$	1,586

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 had a valuation allowance on federal and state deferred tax assets totaling $15,617,000 as of December 31, 2023. In the third quarter of 2024, the Company reassessed the valuation allowance based upon its projections of future sources of taxable income in accordance with applicable accounting guidance and determined it was appropriate to reverse substantially all the valuation allowance which resulted in a one-time discrete reduction to income tax expense of $15,194,000 in the current quarter. Excluding the discrete item, income tax expense for the nine months ended September 30, 2024, totaled $1,500,000 based upon the expected annual tax rate for 2024 of 23.1% compared to income tax expense of $1,586,000 for the nine months ended September 30, 2023, at an effective rate of 17.6%.