v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes

Note 15. Income Taxes

The Company implemented ASU 2023-09 in 2025, which requires disclosure of disaggregated income taxes paid, prescribes standard categories for components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. The Company elected to implement ASU 2023-09 on a prospective basis for disclosures as of and for the year ended December 31, 2025. Disclosures as of and for the year ended December 31, 2024 reflect pre-ASU 2023-09 requirements.

The following tables present the differences between the provision for income taxes at the federal statutory rate and the amounts computed as reported for the periods stated.

 

(Dollars in thousands)

 

For the year ended December 31, 2025

 

Income tax at federal statutory rate

 

$

2,893

 

 

 

21.0

%

Increase (decrease) resulting from:

 

 

 

 

 

 

State income taxes, net of federal tax effect (1)

 

 

102

 

 

 

0.8

%

Nontaxable or nondeductible items

 

 

 

 

 

 

Nondeductible executive compensation

 

 

148

 

 

 

1.1

%

Other permanent differences

 

 

113

 

 

 

0.8

%

Tax credits

 

 

 

 

 

 

Low income housing tax credit

 

 

12

 

 

 

0.1

%

Changes in unrecognized tax benefits

 

 

(269

)

 

 

(2.0

%)

Other

 

 

67

 

 

 

0.5

%

Total income tax expense

 

$

3,066

 

 

 

22.3

%

(1) State tax obligations to North Carolina and Florida comprise more than 50% of the total amount shown.

 

 

(Dollars in thousands)

 

For the year ended December 31, 2024

 

Income tax at federal statutory rate

 

$

(3,466

)

 

 

21.0

%

(Decrease) increase resulting from:

 

 

 

 

 

 

State income taxes, net of federal tax effect

 

 

(398

)

 

 

2.4

%

Tax-exempt interest income

 

 

(29

)

 

 

0.2

%

Tax-exempt BOLI income

 

 

(180

)

 

 

1.1

%

Taxable gain and nondeductible penalties due to BOLI surrender

 

 

2,215

 

 

 

(13.4

%)

Equity compensation

 

 

278

 

 

 

(1.7

%)

Other permanent differences

 

 

458

 

 

 

(2.8

%)

Total income tax benefit

 

$

(1,122

)

 

 

6.8

%

 

The following table presents the significant components of the provision for income taxes for the periods stated.

 

 

 

For the years ended December 31,

 

(Dollars in thousands)

 

2025

 

 

2024

 

Current tax expense (benefit)

 

 

 

 

 

 

Federal

 

$

2,178

 

 

$

5,046

 

State

 

 

(348

)

 

 

18

 

Total current tax expense

 

 

1,830

 

 

 

5,064

 

Deferred tax expense (benefit)

 

 

 

 

 

 

Federal

 

 

889

 

 

 

(5,785

)

State

 

 

347

 

 

 

(401

)

Total deferred tax expense (benefit)

 

 

1,236

 

 

 

(6,186

)

Total income tax expense (benefit)

 

$

3,066

 

 

$

(1,122

)

 

The following table presents significant components of deferred tax assets and liabilities as of the dates stated.

 

 

 

December 31,

 

(Dollars in thousands)

 

2025

 

 

2024

 

Deferred tax assets relating to:

 

 

 

 

 

 

ACL

 

$

4,270

 

 

$

5,138

 

Compensation

 

 

1,706

 

 

 

1,391

 

Reserves for unfunded loan commitments and mortgage-related obligations

 

 

281

 

 

 

721

 

Purchase accounting adjustments

 

 

420

 

 

 

772

 

Net operating loss

 

 

10,172

 

 

 

10,375

 

Unrealized losses on securities available for sale

 

 

8,838

 

 

 

12,392

 

Other

 

 

1,951

 

 

 

2,398

 

Total deferred tax assets

 

 

27,638

 

 

 

33,187

 

Deferred tax liabilities relating to:

 

 

 

 

 

 

Premises and equipment, net

 

 

(2,229

)

 

 

(2,424

)

Core deposit and other intangible assets

 

 

(347

)

 

 

(554

)

Unrealized gains on other investments

 

 

(530

)

 

 

(512

)

Pass-through entities

 

 

(293

)

 

 

(463

)

Other

 

 

(1,518

)

 

 

(1,922

)

Total deferred tax liabilities

 

 

(4,917

)

 

 

(5,875

)

Deferred tax asset, net

 

$

22,721

 

 

$

27,312

 

Deferred income tax assets and liabilities are measured at the enacted tax rate for the period in which they are expected to reverse; therefore, as of December 31, 2025, they have been measured using the federal income tax rate enacted of 21% and applicable state income tax rates.

The Company’s deferred tax asset was $27.6 million and $33.2 million at December 31, 2025 and 2024, respectively. As of December 31, 2025, management concluded that the Company’s deferred tax assets were fully realizable, and accordingly, no valuation allowance was recorded. The Company will continue to monitor deferred tax assets to evaluate whether it will be able to realize the full benefit of the deferred tax asset or whether there is need for a valuation allowance. Significant negative trends in asset credit quality, losses from operations, or other factors could impact the realization of the deferred tax asset in the future.

As of December 31, 2025, the Company had an estimated gross federal net operating loss of approximately $47.3 million, which can be carried forward indefinitely, the tax effect of which is included in the $10.2 million deferred tax asset for net operating losses. However, due to the Private Placements, the Company experienced an ownership change for federal income tax purposes on April 3, 2024, which, among other effects, will subject its pre-change net operating losses to annual limitations under Section 382 of the Internal Revenue Code. The annual limitation is $1.8 million for 2025 and subsequent tax years.

The following table presents income taxes paid, net of refunds received, disaggregated by federal and state jurisdictions as of and for the period stated.

 

(Dollars in thousands)

 

For the year ended December 31, 2025

 

Federal

 

$

6,625

 

Various states

 

 

(50

)

Total cash paid for incomes taxes, net of refunds

 

$

6,575

 

With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to 2022. The Company maintains unrecognized tax benefits ("UTBs") related to unfiled state income tax returns.

A reconciliation of the components of UTBs is presented in the following table for the period stated.

 

(Dollars in thousands)

 

For the year ended December 31, 2025

 

Balance at January 1

 

$

969

 

Additions based on tax positions related to the current year

 

 

94

 

Additions for tax positions of prior years

 

 

44

 

Reductions for tax positions of prior years

 

 

(407

)

Balance at December 31

 

$

700

 

On December 31, 2025, the Company had a $0.7 million UTB balance that, if recognized, would affect the annual effective tax rate. The Company recognizes interest and penalties accrued related to UTBs in income tax expense. During the year ended December 31, 2025, the Company recognized a nominal amount in interest and penalties, with approximately $0.1 million accrued as of December 31, 2025.