NOTE 9 — INCOME TAXES The following table presents information regarding income taxes paid for the year ended December 31, 2025 and 2024. | | | | | | | (Dollars in thousands) | | 2025 | | 2024 | Federal | | $ | 875 | | $ | 50 | States (a) | | | 8 | | | — | | | $ | 883 | | $ | 50 |
| (a) | The amount of state income taxes paid during the year does not meet the 5% disaggregation threshold. |
Pretax income is entirely related to domestic activities, the Corporation did not have any foreign operations. The components of income tax expense (benefit) from continuing operations consisted of the following: | | | | | | | (Dollars in thousands) | | 2025 | | 2024 | Current tax expense: | | | | | | | Federal | | $ | 597 | | $ | 18 | State | | | 10 | | | — | Total | | | 607 | | | 18 | Deferred tax benefit: | | | | | | | Federal | | | (327) | | $ | (63) | State | | | (67) | | | — | Total | | | (394) | | | (63) | Net provision for income tax expense (benefit) from continuing operations | | $ | 213 | | $ | (45) |
The Corporation did not have any income tax expense (benefit) in foreign jurisdictions. The following is a reconciliation between the income tax expense (benefit) and the amount of income taxes which would have been provided at the statutory rate of 21% in accordance with ASU 2023-09: | | | | | | | | | 2025 | | (Dollars in thousands) | | Amount | | Rate | | Tax computed at the statutory federal rate | | $ | 1,337 | | 21.0 | % | State income taxes, net of federal benefit (a) | | | (45) | | (0.7) | | Tax credits: | | | | | | | Low income housing tax credits | | | (840) | | (13.2) | | Nontaxable or nondeductible items: | | | | | | | Tax-exempt income | | | (44) | | (0.7) | | Bank owned life insurance income | | | (193) | | (3.0) | | Other | | | 12 | | 0.2 | | Other adjustments | | | (14) | | (0.2) | | Provision for income taxes | | $ | 213 | | 3.4 | % |
(a) State taxes in Pennsylvania make up the majority (greater than 50%) of the tax effect in this category. The following is a reconciliation between the income tax (benefit) expense and the amount of income taxes which would have been provided at the statutory rate of 21%, below before the adoption of ASU 2023-09: | | | | | | | | | 2024 | | (Dollars in thousands) | | Amount | | Rate | | Federal income tax at statutory rate | | $ | (2,782) | | (21.0) | % | Tax-exempt income | | | (20) | | (0.2) | | Low-income housing credits | | | (875) | | (6.6) | | Bank owned life insurance income | | | (140) | | (1.1) | | Goodwill impairment | | | 3,761 | | 28.4 | | Prior year tax adjustments | | | 6 | | 0.1 | | Other | | | 5 | | 0.1 | | Income tax (benefit) expense and rate | | $ | (45) | | (0.3) | % |
The components of net deferred tax asset at December 31, 2025 and 2024 are as follows: | | | | | | | (Dollars in thousands) | | 2025 | | 2024 | Deferred Tax Assets: | | | | | | | Net unrealized losses on debt securities available-for-sale and derivatives | | $ | 5,196 | | $ | 6,852 | Allowance for credit losses | | | 1,984 | | | 1,617 | Provision for unfunded commitments | | | 19 | | | 21 | Deferred compensation | | | 150 | | | 179 | Lease liabilities | | | 399 | | | 405 | Limited partnership investments | | | 404 | | | 538 | Deferred health insurance | | | 65 | | | 55 | Net operating loss carry forwards | | | 279 | | | 367 | Other | | | 10 | | | 9 | Total | | | 8,506 | | | 10,043 | Valuation allowance | | | (232) | | | (367) | Total, net of valuation allowance | | | 8,274 | | | 9,676 | Deferred Tax Liabilities: | | | | | | | Loan fees and costs | | | 194 | | | 255 | Net unrealized gains on marketable equity securities | | | 301 | | | 255 | Right of use assets | | | 280 | | | 296 | Depreciation | | | 602 | | | 649 | Accretion | | | 411 | | | 491 | Other | | | 23 | | | 5 | Total | | | 1,811 | | | 1,951 | Net Deferred Tax Asset | | $ | 6,463 | | $ | 7,725 |
A valuation allowance for deferred tax assets was recorded in the amount of $232,000 and $367,000 at December 31, 2025 and 2024, respectively. The valuation allowance relates to the deferred taxes of the holding company for the state of Pennsylvania. At December 31, 2025 and 2024, the Corporation had Pennsylvania net operating losses of $7,087,000 and $5,817,000, which have a valuation established against as the holding company is not profitable on a stand alone basis. The net operating losses begin to expire in 2032. The Corporation did not have any uncertain tax positions at December 31, 2025 or 2024. The Corporation is subject to U.S. federal income tax as well as income tax in New Jersey and Pennsylvania. The Corporation is no longer subject to examination by federal or state taxing authorities for years before 2022.
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