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Note 8 - Income Taxes
 12 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 8: Income Taxes

 

Income tax expense for the years ended December 31, 2025 and 2024, is summarized as follows:

 

   Year Ended December 31, 
  

2025

  

2024

 
   (Dollars in thousands)

Loss from continuing operations before income tax expense (benefit) (1)

 $(386) $(789)

Income tax expense (benefit) from continuing operations

        

Current expense

        

Federal

 $—  $— 

State

  —   — 

Total current expense

  —   — 
         

Deferred (benefit) expense

        

Federal

 $(147) $(406)

State

  (49)  17 

Change in valuation allowance

  196   389 

Total deferred expense

  —   — 

Total income tax expense

 $—  $— 

 

(1) No foreign activity. 

 

The difference between the income tax expense shown on the statements of operations and the amounts computed by applying the statutory federal income tax rate to income before income taxes is primarily due to tax-exempt income, the change in valuation allowance, and the adjustment of deferred taxes for enacted changes in tax laws. The provision for income taxes differs from that computed are as follows:

 

  

Year Ended December 31,

 
  

2025

  

2024

 
  

(Dollars in thousands)

 

Tax benefit at statutory federal rate of 21% applied to income before income tax benefit

 $81   21.0% $166   21.0%

State income tax benefit, net of federal effect

  29   7.5%  59   7.5%

Tax-exempt security and loan income, net of TEFRA adjustments

  45   11.6%  45   5.7%

BOLI

  49   12.7%  46   5.9%

Change in valuation allowance

  (196)  (50.8)%  (389)  (49.3)%

Other

  (8)  (2.0)%  73   9.3%

Effective tax rate

 $—   0.0% $—   0.0%

 

Deferred income tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax basis. Deferred tax assets and liabilities are measured using enacted tax rates to apply to taxable income in the period in which the temporary differences are expected to be recovered or settled. Net deferred tax assets are included in accrued interest receivable and other assets in the Consolidated Balance Sheets.

 

The significant components of the Corporation’s deferred tax assets and liabilities were as follows:

 

  Year Ended December 31, 
  

2025

  

2024

 
  (Dollars in thousands) 

Deferred tax assets

        

Allowance for credit losses

 $345  $364 

Deferred compensation

  572   635 

Retirement plans

  258   162 

Premises held for sale impairment

  101   101 

Unrealized loss on securities available-for-sale

  2,297   3,431 

Federal net operating loss carryforwards

  1,564   1,405 

Other

  —   7 

State net operating loss carryforwards

  564   515 

Gross deferred tax assets

  5,701   6,620 

Valuation allowance

  (3,246)  (3,050)

Net deferred tax assets

  2,455   3,570 

Deferred tax liabilities

        

FHLB stock dividends

  (101)  (101)

Accumulated depreciation

  (57)  (38)

Deferred tax liabilities

  (158)  (139)

Net deferred tax asset

 $2,297  $3,431 

 

The Bank does not expect the total amount of unrecognized tax benefits to change significantly in the next twelve months. Gross Federal net operating losses (NOL) as of December 31, 2025 and 2024 are $7.4 million, and $6.7 million, respectively. A portion of the Federal NOL, related to charitable contributions, totaling $1.3 million, as of December 31, 2025, will expire in 2027. The remainder of the Federal NOL does not expire. NOL carryforwards for state income tax purposes were approximately $6.1 million and $5.4 million at December 31, 2025 and 2024, respectively, and will begin expiring in 2026. During 2025, management assessed the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated is the cumulative taxable loss incurred over the five-year period ended December 31, 2025. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.

 

On the basis of this evaluation, as of December 31, 2025, a valuation allowance of $3.2 million has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized. 

 

The Bank did not pay any federal nor state income taxes during the years ending December 31, 2025 and 2024. 

 

There were no uncertain tax positions outstanding as of December 31, 2025 and 2024. As of December 31, 2025, tax years remaining open for State of Illinois and Wisconsin were 2021 through 2024. Federal tax years that remained open were 2022 through 2024. As of December 31, 2025, there were also no unrecognized tax benefits that are expected to significantly increase or decrease within the next twelve months.