Annual report [Section 13 and 15(d), not S-K Item 405]

Note 8 - Income Taxes

v3.26.1
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.