Annual report pursuant to Section 13 and 15(d)

Note 9 - Income Taxes

v3.22.1
Note 9 - Income Taxes
 12 Months Ended
Dec. 31, 2021
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 9: Income Taxes

 

Income tax expense (benefit) for the years ended December 31, 2021 and 2020, is summarized as follows:

 

      Year Ended December 31,  
   

2021

    

2020

  
      (Dollars in thousands)

Current (benefit) expense

                

Federal

   $ 62     $ (262 )

State

     —       3  

Total current benefit

     62       (259 )
                 

Deferred benefit

     (379 )     (233 )

Change in valuation allowance

     103       (11 )

Total deferred benefit

     (276 )     (244 )

Total income tax benefit

   $ (214 )   $ (503 )

 

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,

  
   

2021

    

2020

  
   

(Dollars in thousands)

  

Income before income tax expense

   $ (269 )   $ (615 )

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

     56       129  

State income tax, net of federal effect

     51       117  

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

     50       54  

BOLI

     38       38  

Other

     19       165  

Total income tax expense

   $ 214     $ 503  

Effective tax rate

     (79.6 )%     (81.8 )%

 

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, 2021 and 2020, are as follows:

 

    Year Ended December 31,  
   

2021

    

2020

  
    (Dollars in thousands)  

Deferred tax assets

                

Allowance for loan losses

   $ 222     $ 248  

Deferred compensation

     432       422  

Retirement plans

     55       147  

Premises held for sale impairment

     101       101  

Unrealized loss on securities available-for-sale

     32       —  

Federal net operating loss carryforwards

     218       —  

Other

     53       39  

State net operating loss carryforwards

     306       203  

Gross deferred tax assets

     1,419       1,160  

Valuation allowance

     (306 )     (203 )

Net deferred tax assets

     1,113       957  

Deferred tax liabilities

                

FHLB stock dividends

     (101 )     (101 )

Accumulated depreciation

     (36 )     (46 )

Unrealized gain on securities available-for-sale

     —       (561 )

Other

     —       (142 )

Deferred tax liabilities

     (137 )     (850 )

Net deferred tax asset

   $ 976     $ 107  

 

 

The Bank does not expect the total amount of unrecognized tax benefits to change significantly in the next twelve months. Federal net operating losses as of December 31, 2021 and 2020 are $1.5 million, and $0, respectively, and do not expire. Net operating loss (NOL) carryforwards for state income tax purposes were approximately $3.2 million and $2.3 million at December 31, 2021 and 2020, respectively, and will begin expiring in 2022. 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 was recorded on the related deferred tax asset.

 

There were no uncertain tax positions outstanding as of December 31, 2021 and 2020. As of December 31, 2021, tax years remaining open for State of Illinois and Wisconsin were 2017 through 2020. Federal tax years that remained open were 2018 through 2020. As of December 31, 2021, there were also no unrecognized tax benefits that are expected to significantly increase or decrease within the next twelve months.