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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Taxes  
Income Taxes Text Block
NOTE 11:
 
INCOME TAXES
For the years ended December 31, 2023 and 2022 the components of income tax expense
 
from continuing operations are
presented below.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year ended December 31
(Dollars in thousands)
2023
2022
Current income tax (benefit) expense:
Federal
$
(448)
1,461
State
(134)
356
Total current income tax (benefit) expense
(582)
1,817
Deferred income tax (benefit) expense:
Federal
(293)
556
State
98
130
Total deferred
 
income tax (benefit) expense
(195)
686
Total income tax (benefit) expense
 
$
(777)
2,503
Total income tax expense differs
 
from the amounts computed by applying the statutory federal income tax rate of 21%
 
to
earnings before income taxes.
 
A reconciliation of the differences for the years ended December 31,
 
2023 and 2022, is
presented below.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2023
2022
Percent of
Percent of
pre-tax
pre-tax
(Dollars in thousands)
Amount
earnings
Amount
earnings
Earnings before income taxes
$
618
12,849
Income taxes at statutory rate
130
21.0
%
2,698
21.0
%
Tax-exempt interest
(493)
(79.8)
(523)
(4.1)
State income taxes, net of
 
federal tax effect
(43)
(7.0)
346
2.7
New Markets Tax Credit
(356)
(57.6)
(356)
(2.8)
Bank-owned life insurance
(88)
(14.2)
141
1.1
Other
73
11.9
197
1.6
Total income tax (benefit) expense
 
$
(777)
(125.7)
%
2,503
19.5
%
At December 31, 2023 and 2022, the Company had a net deferred tax asset of $10.3
 
million and $13.8 million, respectively,
included in other assets on the consolidated balance sheet.
 
The tax effects of temporary differences that
 
give rise to
significant portions of the deferred tax assets and deferred tax liabilities at December
 
31, 2023 and 2022 are presented
below.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31
(Dollars in thousands)
2023
2022
Deferred tax assets:
Allowance for credit losses
$
1,724
1,448
Unrealized loss on securities
9,734
13,722
Net operating loss carry-forwards
253
—
Tax credit carry-forwards
356
—
Accrued bonus
 
185
228
Right of use liability
128
153
Other
71
70
Total deferred
 
tax assets
12,451
15,621
Deferred tax liabilities:
Premises and equipment
1,315
767
Originated mortgage servicing rights
249
289
Right of use asset
122
148
New Markets Tax Credit investment
181
179
Other
332
469
Total deferred
 
tax liabilities
2,199
1,852
Net deferred tax asset
$
10,252
13,769
A valuation allowance is recognized for a deferred tax asset if, based on the weight of available
 
evidence, it is more-likely-
than-not that some portion of the entire deferred tax asset will not be realized.
 
The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the periods
 
in which those temporary differences
become deductible.
 
Management considers the scheduled reversal of deferred tax liabilities,
 
projected future taxable
income and tax planning strategies in making this assessment. Based upon the level of historical
 
taxable income and
projection for future taxable income over the periods which the temporary differences
 
resulting in the remaining deferred
tax assets are deductible, management believes it is more-likely-than
 
-not that the Company will realize the benefits of these
deductible differences at December 31, 2023.
 
The amount of the deferred tax assets considered realizable, however,
 
could
be reduced in the near term if estimates of future taxable income are reduced.
The change in the net deferred tax asset for the years ended December 31, 2023
 
and 2022, is presented
 
 
 
 
 
 
 
 
 
 
 
Year ended December 31
(Dollars in thousands)
2023
2022
Net deferred tax asset (liability):
Balance, beginning of year
$
13,769
435
Cumulative effect of change in accounting standard
276
—
Deferred tax expense related to continuing operations
195
(686)
Stockholders' equity, for accumulated
 
other comprehensive income
(3,988)
14,020
Balance, end of year
$
10,252
13,769
ASC 740,
Income Taxes,
 
defines the threshold for recognizing the benefits of tax return positions in the financial statements
as “more-likely-than-not” to be sustained by the taxing authority.
 
This section also provides guidance on the de-
recognition, measurement, and classification of income tax uncertainties in interim
 
periods.
 
As of December 31, 2023, the
Company had no unrecognized tax benefits related to federal or state income tax matters.
 
The Company does not anticipate
any material increase or decrease in unrecognized tax benefits during 2024
 
relative to any tax positions taken prior to
December 31, 2023.
 
As of December 31, 2023, the Company has accrued no interest and no penalties related to uncertain
tax positions.
 
It is the Company’s policy to recognize interest
 
and penalties related to income tax matters in income tax
expense.
 
The Company and its subsidiaries file consolidated U.S. federal and State of Alabama income
 
tax returns.
 
The Company is
currently open to audit under the statute of limitations by the Internal Revenue Service and the State of
 
Alabama for the
years ended December 31, 2020 through 2023.