v3.26.1
INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES

Note 14—INCOME TAXES

Income tax expense for the years ended December 31, 2025, 2024 and 2023 consists of the following:

 

   Year ended December 31 
(Dollars in thousands)  2025   2024   2023 
Current               
Federal  $6,537   $3,576   $2,937 
State   232    219    627 
Total Current   6,769    3,795    3,564 
Deferred               
Federal   (1,012)   71    (327)
State   (103)   (51)   (40)
Total Deferred   (1,115)   20    (367)
Income tax expense  $5,654   $3,815   $3,197 

 

Reconciliation from expected federal tax expense to effective income tax expense for the periods indicated are as follows:  

 

    Year ended December 31  
(Dollars in thousands)   2025   2024   2023  
Expected federal income tax expense   $ 5,220     21.00 %   $ 3,732     21.00 %   $ 3,159     21.00 %
State income tax net of federal benefit   102    0.41 %   133   0.54 %    464    3.08 %
Tax exempt interest   (227)   -0.91 %   (195)  -0.78 %    (275)   -1.83 %
Increase in cash surrender value life insurance   (174)   -0.70 %   (168)  -0.68 %    (176)   -1.17 %
Valuation allowance   4    0.02 %   64   0.26 %    93    0.62 %
Life Insurance Proceeds   —    0.00 %   —   0.00 %    (19)   -0.13 %
Excess tax benefit of stock compensation   —    0.00 %   30   0.12 %    —    0.00 %
Tax credits   (22)   -0.09 %   105   0.42 %    —    0.00 %
Other   751    3.02 %   114   0.46 %    (49)   -0.33 %
Total  $5,654    22.75 %  $3,815   21.33 %   $3,197    21.25 %

The following is a summary of the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities:

 

   December 31, 
(Dollars in thousands)  2025   2024 
Assets:          
Allowance for credit losses  $2,950   $2,813 
Unfunded Commitments   113    103 
Excess tax basis of deductible intangible assets   14    26 
Net operating loss carry forward   1,001    997 
Unrealized losses on available-for-sale securities   2,667    4,191 
Unrealized losses on held-to-maturity securities   2,225    2,557 
Compensation expense deferred for tax purposes   1,622    1,528 
Deferred loss on other-than-temporary-impairment charges   5    5 
Origination Income & Costs   491    439 
Other Real Estate Owned   227    228 
Accrued bonuses and vacation   330    76 
Other   579    42 
Total deferred tax asset   12,224    13,025 
Valuation reserve   (1,077)   (1,073)
Total deferred tax asset net of valuation reserve   11,147    11,952 
Liabilities:          
Tax depreciation in excess of book depreciation   657    668 
Excess financial reporting basis of assets acquired   830    863 
Total deferred tax liabilities   1,487    1,531 
Net deferred tax asset recognized  $9,660   $10,421 

 

The Company has approximately $25.6 million and $25.2 million in state net operating losses at December 31, 2025 and 2024, respectively. A valuation allowance is established to fully offset the deferred tax asset related to these net operating losses of the holding company. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Additional amounts of these deferred tax assets considered to be realizable could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced. The net deferred asset is included in other assets on the consolidated balance sheets.

 

A portion of the change in the net deferred tax asset relates to unrealized gains/losses on securities available-for-sale and held-to-maturity. The tax expense related to the change of $1.9 million has been recorded directly to accumulated other comprehensive income within shareholders’ equity. The balance in the change in net deferred tax asset results from the current period deferred tax benefit of $1.1 million. At December 31, 2025 and 2024, the Company had no federal net operating loss carryforward.

Tax returns for 2022 and subsequent years are subject to examination by taxing authorities.

As of December 31, 2025, the Company had no material unrecognized tax benefits or accrued interest and penalties. It is the Company’s policy to account for interest and penalties accrued relative to unrecognized tax benefits as a component of income tax expense.

 

During the year ended December 31,2025, the Company paid $5.5 million in cash for federal, state, and local income taxes. Of this $5.5 million, $5.4 million was for federal income taxes, and $134 thousand for other state or local income tax paid (no state was greater than 5% of total cash paid for federal, state, and local income taxes). During the year ended December 31, 2024 the Company paid $3.8 million in cash for federal, state, and local income taxes. Of this $3.8 million, $3.4 million was for federal income taxes, $305 thousand was for South Carolina income taxes, and $17 thousand for other state or local income tax paid (those states with less than 5% of total cash paid for federal, state, and local income taxes). During the year ended December 31, 2023, the Company paid $3.6 million in cash for federal, state, and local income taxes. Of this $3.6 million, $2.8 million was for federal income taxes, $565 thousand was for South Carolina income taxes, and $169 thousand for other state or local income tax paid (those states with less than 5% of total cash paid for federal, state, and local income taxes).