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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

Note 15. Income Taxes

The following table presents the differences between the provision for income taxes at the federal statutory rate and the amounts computed as reported for the periods stated.

 

 

 

For the years ended December 31,

 

(Dollars in thousands)

 

2024

 

 

2023

 

Income tax at federal statutory rate

 

$

(3,466

)

 

 

21.0

%

 

$

(12,358

)

 

 

21.0

%

(Decrease) increase resulting from:

 

 

 

 

 

 

 

 

 

 

 

 

     State income taxes, net of federal tax effect

 

 

(398

)

 

 

2.4

%

 

 

72

 

 

 

(0.1

%)

     Tax-exempt interest income

 

 

(29

)

 

 

0.2

%

 

 

(50

)

 

 

0.1

%

     Tax-exempt BOLI income

 

 

(180

)

 

 

1.1

%

 

 

(251

)

 

 

0.4

%

     Taxable gain and nondeductible penalties due to BOLI surrender

 

 

2,215

 

 

 

(13.4

%)

 

 

—

 

 

 

—

 

     Impairment of goodwill

 

 

—

 

 

 

—

 

 

 

5,348

 

 

 

(9.1

%)

     Equity compensation

 

 

278

 

 

 

(1.7

%)

 

 

156

 

 

 

(0.3

%)

     Other permanent differences

 

 

458

 

 

 

(2.8

%)

 

 

12

 

 

 

(—

%)

Total benefit for income taxes

 

$

(1,122

)

 

 

6.8

%

 

$

(7,071

)

 

 

12.0

%

 

The following table presents the significant components of the provision for income taxes for the periods stated.

 

 

 

For the years ended December 31,

 

(Dollars in thousands)

 

2024

 

 

2023

 

Current tax provision (benefit)

 

 

 

 

 

 

     Federal

 

$

5,046

 

 

$

165

 

     State

 

 

18

 

 

 

(181

)

          Total current tax provision (benefit)

 

 

5,064

 

 

 

(16

)

Deferred tax benefit

 

 

 

 

 

 

     Federal

 

 

(5,785

)

 

 

(7,048

)

     State

 

 

(401

)

 

 

(7

)

          Total deferred tax benefit

 

 

(6,186

)

 

 

(7,055

)

Total benefit for income taxes

 

$

(1,122

)

 

$

(7,071

)

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table presents significant components of deferred tax assets and liabilities as of the dates stated.

 

 

 

December 31,

 

(Dollars in thousands)

 

2024

 

 

2023

 

Deferred tax assets relating to:

 

 

 

 

 

 

     Allowance for credit losses

 

$

5,138

 

 

$

7,857

 

     Compensation differences

 

 

1,391

 

 

 

1,349

 

     Reserves for unfunded loan commitments, sold loan buy
     backs, and MSR assets sale recourse obligations

 

 

721

 

 

 

904

 

     Purchase accounting adjustments

 

 

772

 

 

 

862

 

     Net operating loss

 

 

10,375

 

 

 

5,161

 

     Pass-through entities

 

 

—

 

 

 

624

 

     Unrealized losses on securities available for sale

 

 

12,392

 

 

 

12,822

 

     Other

 

 

2,398

 

 

 

5,061

 

          Total deferred tax assets

 

 

33,187

 

 

 

34,640

 

Deferred tax liabilities relating to:

 

 

 

 

 

 

     Premises and equipment, net

 

 

(2,424

)

 

 

(2,102

)

     Core deposit and other intangible assets

 

 

(554

)

 

 

(807

)

     MSR assets

 

 

(86

)

 

 

(5,935

)

     Unrealized gains on other investments

 

 

(512

)

 

 

(2,224

)

     Pass-through entities

 

 

(463

)

 

 

—

 

     Other

 

 

(1,836

)

 

 

(2,016

)

          Total deferred tax liabilities

 

 

(5,875

)

 

 

(13,084

)

Deferred tax asset, net

 

$

27,312

 

 

$

21,556

 

Deferred income tax assets and liabilities are measured at the enacted tax rate for the period in which they are expected to reverse; therefore, as of December 31, 2024, they have been measured using the federal income tax rate enacted of 21% and applicable state income tax rates.

The Company’s deferred tax asset was $33.2 million and $34.6 million at December 31, 2024 and 2023, respectively. As of December 31, 2024, management concluded that the Company’s deferred tax assets were fully realizable, and accordingly, no valuation allowance was recorded. The Company will continue to monitor deferred tax assets to evaluate whether it will be able to realize the full benefit of the deferred tax asset or whether there is need for a valuation allowance. Significant negative trends in asset credit quality, losses from operations, or other factors could impact the realization of the deferred tax asset in the future.

As of December 31, 2024, the Company had an estimated gross federal net operating loss of approximately $48.1 million, which can be carried forward indefinitely, the tax effect of which is included in the $10.4 million deferred tax asset for net operating losses. However, due to the Private Placements, the Company experienced an

ownership change on April 3, 2024, for federal income tax purposes, which, among other effects, will subject its pre-change net operating losses to annual limitations under Section 382 of the Internal Revenue Code. Following the ownership change, the Company recognized estimated built-in tax losses of $22.8 million, a component of the $48.1 million estimated gross federal net operating loss as of and for the year ended December 31, 2024. The estimated annual limitation was $1.4 million for 2024 and $1.8 million for subsequent tax years.

As of December 31, 2024 and 2023, the Company had no uncertain tax positions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2020.