INCOME TAXES

12 Months Ended

Dec. 31, 2018

INCOME TAXES

9. INCOME TAXES

9. INCOME TAXES

At December 31, 2018, the Bank has net operating loss carry forwards of approximately $11,763,000 for income tax purposes that expire in 2024 through 2038.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. For financial reporting purposes, a valuation allowance of $2,755,000 and $2,505,700 as of December 31, 2018 and 2017, respectively, has been recognized to offset the net deferred tax assets related to the cumulative temporary differences and the tax loss carry forwards. Significant components of the Bank’s net deferred tax assets are as follows:

	December 31,
(in 000’s)	2018			2017
Deferred tax assets (liabilities):
Provision for loan losses	$	29		$	7
Unrealized (loss) gain on investment securities		(25	)		(15	)
Depreciation		37			(22	)
Net operating carryforwards		2,459			2,243
Other, net		230			278
Valuation allowance for deferred tax assets		(2,755	)		(2,506	)
Net deferred tax assets	$	(25	)	$	(15	)

	2018			2017
Effective rate reconciliation:
Tax at statutory rate (21% in 2018, 34% in 2017)	$	(312	)	$	(109	)
Change in tax rate		-			1,551
Nondeductible expenses		6			8
Increase in valuation allowance		290			(1,371	)
True-up of NOL		6			(74	)
Other		10			(5	)
Total tax expense	$	-		$	-

At December 31, 2018 and 2017, no valuation allowance was recorded for the deferred tax asset related to the unrealized holding losses on securities available-for-sale because the Company had the intent and the ability to hold these securities until recovery of the unrealized losses, which may be at maturity. The Company will continue to monitor its deferred tax position and may make changes to the valuation allowance recorded as circumstances change.

Management has evaluated the Bank’s tax positions and concluded that the Bank has taken no uncertain tax positions that require adjustment to the financial statements. With few exceptions, as of December 31, 2018, the Bank is no longer subject to income tax examinations by the U.S. federal, state or local tax authorities for the years before 2014.