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

Note 8 - Income Taxes

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Note 8 - Income Taxes
 12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 8: Income Taxes

 

Income tax expense for the years ended December 31, 2024 and 2023, is summarized as follows:

 

      Year Ended December 31,  
   

2024

    

2023

  
      (Dollars in thousands)

Current expense

                

Federal

   $ —     $ 9  

State

     —       —  

Total current expense

     —       9  
                 

Deferred benefit

     (389 )     (1,150 )

Change in valuation allowance

     389       2,140  

Total deferred expense

     —       990  

Total income tax expense

   $ —     $ 999  

 

The difference between the income tax expense shown on the statements of income 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,

  
   

2024

    

2023

  
   

(Dollars in thousands)

  

Loss before income tax expense

   $ (789 )   $ (2,958 )

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

     166       621  

State income tax benefit, net of federal effect

     59       222  

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

     45       77  

BOLI

     46       40  

Change in valuation allowance

     (389 )     (2,140 )

Other

     73       181  

Total income tax expense

   $ —     $ (999 )

Effective tax rate

     — %     (33.8 )%

 

The tax effects of existing temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2024 and 2023, are as follows:

 

    Year Ended December 31,  
   

2024

    

2023

  
    (Dollars in thousands)  

Deferred tax assets

                

Allowance for credit losses

   $ 364     $ 339  

Deferred compensation

     635       556  

Retirement plans

     162       181  

Premises held for sale impairment

     101       101  

Unrealized loss on securities available-for-sale

     3,431       3,279  

Federal net operating loss carryforwards

     1,405       1,042  

Other

     7       15  

State net operating loss carryforwards

     515       532  

Gross deferred tax assets

     6,620       6,045  

Valuation allowance

     (3,050 )     (2,661 )

Net deferred tax assets

     3,570       3,384  

Deferred tax liabilities

                

FHLB stock dividends

     (101 )     (101 )

Accumulated depreciation

     (38 )     (4 )

Deferred tax liabilities

     (139 )     (105 )

Net deferred tax asset

   $ 3,431     $ 3,279  

 

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, 2024 and 2023 are $6.7 million, and $5.0 million, respectively. A portion of the Federal NOL, related to charitable contributions, totaling $1.3 million, as of December 31, 2024, will expire in 2027. The remainder of the Federal NOL does not expire. During 2024, 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 four-year period ended December 31, 2024. 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, 2024, a valuation allowance of $2.5 million has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized. 

 

NOL carryforwards for state income tax purposes were approximately $5.4 million and $5.6 million at December 31, 2024 and 2023, respectively, and will begin expiring in 2025. Due to the uncertainty that the Bank will be able to generate future state taxable income sufficient to utilize the net operating loss carryforwards, a full valuation allowance of $515,000 has been recorded on the related deferred tax asset.

 

There were no uncertain tax positions outstanding as of December 31, 2024 and 2023. As of December 31, 2024, tax years remaining open for State of Illinois and Wisconsin were 2020 through 2023. Federal tax years that remained open were 2021 through 2023. As of December 31, 2024, there were also no unrecognized tax benefits that are expected to significantly increase or decrease within the next twelve months.