INCOME TAXES

12 Months Ended

Dec. 31, 2023

INCOME TAXES

INCOME TAXES

NOTE 9 — INCOME TAXES

The current and deferred components of the income tax expense consisted of the following:

(Dollars in thousands)

	2023		2022
Federal
Current	$	431	$	2,180
Deferred		253		114
Income tax expense	$	684	$	2,294

The following is a reconciliation between the income tax expense and the amount of income taxes which would have been provided at the statutory rate of 21%:

(Dollars in thousands)

	2023				2022
	Amount		Rate		Amount		Rate
Federal income tax at statutory rate	$	1,311	21.0	%	$	3,427	21.0	%
Tax-exempt income		(106)	(1.7)			(749)	(4.6)
Low-income housing credits		(484)	(7.7)			(249)	(1.5)
Bank owned life insurance income		(130)	(2.1)			(125)	(0.7)
Prior year tax adjustments		82	1.3			—	—
Other		11	0.2			(10)	(0.1)
Income tax expense and rate	$	684	11.0	%	$	2,294	14.1	%

The components of the net deferred tax asset at December 31, 2023 and 2022 are as follows:

(Dollars in thousands)

	2023		2022
Deferred Tax Assets:
Net unrealized losses on debt securities available-for-sale and derivatives	$	7,880	$	7,857
Allowance for loan losses		1,454		1,738
Provision for unfunded commitments		35		14
Deferred compensation		218		238
Contributions		4		6
Accrued rent expense		106		103
Operating lease liabilities		415		426
Finance lease liabilities		—		1
Limited partnership investments		322		313
Impairment loss on securities		4		4
Deferred health insurance		53		48
Capital and net operating loss carry forwards		285		258
Valuation allowance related to state net operating losses		(285)		(258)
Total		10,491		10,748
Deferred Tax Liabilities:
Loan fees and costs		225		237
Net unrealized gains on marketable equity securities		231		319
Operating lease right-of-use assets		415		426
Accumulated depreciation		438		287
Accretion		172		36
Mortgage servicing rights		58		57
Intangibles		257		257
Total		1,796		1,619
Net Deferred Tax Asset	$	8,695	$	9,129

A valuation allowance for deferred tax assets was recorded in the amount of $285,000 and $258,000 at December 31, 2023 and 2022, respectively. The valuation allowance relates to state net operating loss carryforwards for which realizability is uncertain. At December 31, 2023 and 2022, the Corporation had state net operating loss carryforwards, net of a valuation allowance, of $0, which are available to offset future state taxable income, and expire at various dates through 2043.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is

dependent upon the generation of future taxable income during 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 on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible and tax planning strategies, management believes it is more likely than not that the Corporation will realize the benefits of these deferred tax assets, net of any valuation allowance at December 31, 2023.

The Corporation did not have any uncertain tax positions at December 31, 2023 and 2022.

The Corporation and its subsidiary file a consolidated federal income tax return. The Corporation is no longer subject to examination by Federal or State taxing authorities for the years before 2020.