XML 40 R22.htm IDEA: XBRL DOCUMENT v3.25.1
Note 12 - Income Taxes
 12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 12 - INCOME TAXES

 

The asset and liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

 

The table below presents the components of income tax expense for the years indicated:

 

   For the Year Ended December 31, 
  2024  2023  2022 

Current:

 

(dollars in thousands)

 

Federal

 $6,539  $10,804  $18,315 

State

  5,393   6,761   10,952 

Total Current

  11,932   17,565   29,267 
             

Deferred:

            

Federal

  (1,646)  (288)  (1,756)

State

  (1,272)  504   (493)

Total Deferred

  (2,918)  216   (2,249)

Total income tax expense

 $9,014  $17,781  $27,018 

 

The following table presents a comparison of the federal statutory income tax rates to the Company's effective income tax rates for the years indicated:

 

  For the Year Ended December 31, 
  

2024

  

2023

  

2022

 
  Amount  Rate  Amount  Rate  Amount  Rate 
  

(dollars in thousands)

 

Statutory federal tax

 $7,493   21.0% $12,652   21.0% $19,182   21.0%

State tax, net of federal benefit

  3,391   9.5%  5,181   8.6%  8,278   9.1%

Tax-exempt income

  (429)  (1.2)%  (399)  (0.7)%  (355)  (0.4)%

Stock-based compensation

  (10)  0.0%  54   0.1%  (396)  (0.4)%

Tax credits, net of amortization

  (978)  (2.7)%  (62)  (0.1)%  (80)  (0.1)%

Other items, net

  (453)  (1.3)%  355   0.6%  389   0.4%

Total income tax expense

 $9,014   25.3% $17,781   29.5% $27,018   29.6%

 

Deferred taxes are a result of differences between income tax accounting and GAAP with respect to income and expense recognition. The following is a summary of the components of the net deferred tax asset accounts recognized in the accompanying balance sheets as of  December 31:

 

   2024   2023 

Deferred tax assets:

 

(dollars in thousands)

 

Allowance for credit losses

 $14,889  $13,011 

Stock-based compensation

  244   472 

Operating loss carryforwards

  4   32 

Unrealized loss on AFS securities

  8,980   8,597 

Lease liability

  9,127   9,539 

State tax

  944   1,444 

Other

  1,424   1,237 
   35,612   34,332 

Deferred tax liabilities:

        

Depreciation

  (425)  (1,389)

Deferred loan costs

  (3,127)  (3,123)

Acquisition accounting fair value adjustments

  (2,536)  (2,794)

Mortgage servicing rights

  (1,738)  (1,991)

Right of use asset

  (8,618)  (9,115)

Other

  (113)  (155)
   (16,557)  (18,567)

Net deferred tax assets

 $19,055  $15,765 

 

At December 31, 2024, we have usable net operating loss carryforwards from acquisitions of $18,466 for federal and $5,570 for California income tax purposes. Net operating loss carry forwards, to the extent not used, will begin to expire in 2028. The net operating loss carryforwards were generated through acquisitions, and as a result, are substantially limited by Section 382 of the Internal Revenue Code. Benefits not expected to be realized due to the limitation have been excluded from the deferred tax asset and net operating loss carryforward amounts noted above. Based on management's assessment, we concluded that no valuation allowance was necessary for the deferred tax assets as of December 31, 2024. 

 

We file income tax returns in federal and various state jurisdictions. We are subject to examinations in federal jurisdiction for the years ended after December 31, 2020. The statutes of limitations for state income tax returns remain open for tax years in accordance with each state's statutes. The audit of our New York State tax returns for the tax period from January 1, 2018 to December 31, 2020 was completed in August 2023 and we paid additional tax and interest of $70,000 without penalties to settle the tax audit findings with New York State. We recorded a $1.1 million liability related to uncertain tax positions at December 31, 2024. We recognized no material interest or penalties as part of income taxes for the years ended December 31, 2024, 2023, and 2022.

 

Purchased Federal Transferable Tax Credits

 

On September 13, 2024, we entered into a Purchase and Sale Agreement (PSA) for the purchase of approximately $23.2 million in federal transferable tax credits to be generated by four projects. Two of the projects were placed in service in 2024 and generated approximately $12.9 million of federal transferable tax credits. The approximate purchase price of $12.0 million will be paid by us to the seller, an independent third party, upon the achievement of certain benchmarks outlined in the PSA. We utilized the purchased tax credits of $12.9 million to offset amounts that otherwise would be due and payable to the IRS for 2024 and potentially prior tax years.  The accounting treatment is an increase in income tax receivable from the IRS, a liability to the seller, and a reduction to income tax expense in the period the qualifying project is placed in service.