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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | 9. Income Taxes The components of the provision for income taxes are as follows:
|  | Years Ended December 31, |
|  | 2019 |  | 2018 |
Current expense (benefit): |  |  |  |  |  |  |
Federal |  | $ | 1,621 |  | $ | 900 |
State |  |  | 2 |  |  | 12 |
Total |  |  | 1,623 |  |  | 912 |
Deferred expense: |  |  |  |  |  |  |
Federal |  |  | (94) |  |  | 102 |
Total provision for income taxes |  | $ | 1,529 |  | $ | 1,014 |
The following is a reconciliation between the expected federal statutory income tax rate of 21% (2019 and 2018) and the Company’s actual income tax expense and rate:
|  | Years ended December 31, |
|  | 2019 |  | 2018 |
Provision at statutory rate |  | $ | 1,573 |  | 21 | % | $ | 1,128 |  | 21 | %
Tax exempt income |  |  | (84) |  | (1) | % |  | (92) |  | (1) | %
State income taxes, net of federal income tax benefit |  |  | 12 |  | 0 | % |  | 18 |  | 0 | %
Other, net |  |  | 28 |  | 0 | % |  | (40) |  | (1) | %
Effective income tax and rate |  | $ | 1,529 |  | 20 | % | $ | 1,014 |  | 19 | %
The tax effects of temporary differences that give rise to significant components of the deferred tax assets and deferred tax liabilities at December 31, 2019 and 2018 are presented below:
|  | December 31,
|  | 2019 |  | 2018
Deferred tax assets: |  |  |  |  |  |
Allowance for loan losses |  | $ | 1,608 |  | $ | 1,794
Deferred expenses |  |  | 937 |  |  | 783
Unrecognized pension liability |  |  | 1,038 |  |  | 1,179
Postretirement liability |  |  | 932 |  |  | 914
Deferred loss on OREO |  |  | 187 |  |  | 187
Unrealized loss on securities |  |  | 53 |  |  | 685
State tax NOLs |  |  | 870 |  |  | 779
Other |  |  | 201 |  |  | 134
Gross deferred tax assets |  |  | 5,826 |  |  | 6,455
Deferred tax liabilities: |  |  |  |  |  |
Prepaid expenses |  |  | (209) |  |  | (241)
Prepaid pension |  |  | (1,248) |  |  | (1,305)
Deferred loan fees |  |  | (207) |  |  | (170)
Depreciation and amortization |  |  | (104) |  |  | (105)
Mortgage servicing rights |  |  | (601) |  |  | (615)
Gross deferred tax liabilities |  |  | (2,369) |  |  | (2,436)
Net deferred tax asset |  |  | 3,457 |  |  | 4,019
Deferred tax valuation allowance |  |  | (1,202) |  |  | (1,085)
Deferred tax assets, net of allowance |  | $ | 2,255 |  | $ | 2,934
Income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the relative federal or state tax law to the taxable income determined. The Company determines deferred income taxes using the liability (or balance sheet method). Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases at the currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. Deferred income tax expense or benefit results from changes in deferred tax assets (“DTAs”) and liabilities between periods. DTAs are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized. Due to recent changes in New York State (“NYS”) tax law which have provided for a permanent deduction of income from “qualified” loans for community banks, management determined that the Company would most likely not pay any income tax but will rather generate NYS net operating losses (“NOLs”) for the foreseeable future. In management’s opinion, it is expected that in future years there will be no opportunity to reverse the NYS DTAs to provide a reduction in NYS income taxes, so the Company established a full valuation allowance to recognize the fully diminished value of those DTAs. The Company will likely pay the NYS capital based tax until the expected phase out of that tax scheduled for December 31, 2020. Retained earnings at December 31, 2019 and 2018 include a contingency reserve for loan losses of $1,534 which represents the tax reserve balance existing at December 31, 1987 and is maintained in accordance with provisions of the Internal Revenue Code applicable to mutual savings banks. Amounts transferred to the reserve have been claimed as deductions from taxable income and, if the reserve is used for purposes other than to absorb losses on loans, a federal income tax liability could be incurred. It is not anticipated that the Company will incur a federal income tax liability relating to this reserve balance and accordingly, deferred income taxes of $414 at December 31, 2019 and $414 at December 31, 2018 have not been recognized. The Company’s income tax returns are subject to review and examination by federal and state taxing authorities. The Company is currently open to audit under the applicable statutes of limitations by the Internal Revenue Service for the years ended December 31, 2016 through 2019. The years open to examination by state taxing authorities vary by jurisdiction; no years prior to 2016 are open.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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