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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Taxes [Abstract]  
Income Taxes

NOTE 13 – INCOME TAXES

Income tax expense was as follows:

December 31, 2023

December 31, 2022

December 31, 2021

Current federal

$

3,592

$

4,213

$

3,592

Deferred federal (1)

456

215

773

Total

$

4,048

$

4,428

$

4,365

(1)Includes tax benefit of operating loss carryforwards of $34, $34, and $34 for the years ended December 31, 2023, 2022 and 2021, respectively.

Effective tax rates differ from the federal statutory rate of 21% for 2023, 2022 and 2021 applied to income before income taxes due to the following:

December 31, 2023

December 31, 2022

December 31, 2021

Federal Statutory rate times financial statement income

$

4,407

$

4,744

$

4,792

Effect of:

Stock compensation

(7)

(50)

(50)

Bank owned life insurance income

(131)

(126)

(112)

Gain on redemption of life insurance policies

-

-

(80)

Tax credits, net of amortization

(194)

(111)

(154)

Other

(27)

(29)

(31)

$

4,048

$

4,428

$

4,365

Effective tax rate

19%

20%

19%

Year-end deferred tax assets and liabilities were due to the following:

2023

2022

Deferred tax assets:

Allowance for credit losses

$

3,819

$

3,458

Compensation related items

599

573

Deferred loan fees

-

-

Nonaccrual interest

13

9

Net operating loss carry forward

295

330

Operating lease liabilities

1,142

302

Unrealized mark-to-market loss

609

541

6,477

5,213

Deferred tax liabilities:

FHLB stock dividend

226

226

Depreciation

469

268

Operating lease right-of-use assets

1,124

285

Deferred loan costs

9

34

Limited partnership interests

642

-

Prepaid expenses

65

70

2,535

883

Net deferred tax asset

$

3,942

$

4,330

At December 31, 2023, the Company had a deferred tax asset recorded of approximately $3,942. At December 31, 2022, the Company had a deferred tax asset recorded of approximately $4,330. These balances are included in the accrued interest receivable and other assets on the consolidated balance sheets. At December 31, 2023 and December 31, 2022, the Company had no unrecognized tax benefits recorded. The Company is subject to U.S. federal income tax and is no longer subject to federal examination for years prior to 2020.

Our deferred tax assets are composed of U.S. net operating losses (“NOLs”), and other temporary book to tax differences. When determining the amount of deferred tax assets that are more-likely-than-not to be realized, and therefore recorded as a benefit, the Company conducts a regular assessment of all available information. This information includes, but is not limited to, taxable income in prior periods, projected future income and projected future reversals of deferred tax items. Based on these criteria, the Company determined as of December 31, 2023 that no valuation allowance was required against the net deferred tax asset.

In 2012, a recapitalization program through the sale of $22,500 in common stock improved the capital levels of CFBank and provided working capital for the Holding Company. The result of the change in stock ownership associated with the stock offering, however, was that the Company incurred an ownership change within the guidelines of Section 382 of the Internal Revenue Code of 1986. At year-end 2023, the Company had net operating loss carryforwards of $21,927, which expire at various dates from 2024 to 2032. As a result of the ownership change, the Company's ability to utilize carryforwards that arose before the 2012 stock offering closed is limited to $163 per year. Due to this limitation, management determined it was more likely than not that $20,520 of net operating loss carryforwards would expire unutilized. As required by accounting standards, the Company reduced the carrying value of deferred tax assets, and the corresponding valuation allowance, by the $6,977 tax effect of this lost realizability.

Federal income tax laws provided additional deductions, totaling $2,250, for thrift bad debt reserves established before 1988. Accounting standards do not require a deferred tax liability to be recorded on this amount, which otherwise would have totaled $473 at year-end 2023. However, if CFBank were wholly or partially liquidated or otherwise ceases to be a bank, or if tax laws were to change, this amount would have to be recaptured and a tax liability recorded. Additionally, any distributions in excess of CFBank’s current or accumulated earnings and profits would reduce amounts allocated to its bad debt reserve and create a tax liability for CFBank.


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