INCOME TAXES
The Company operates solely within the United States and has no foreign operations. Income tax expense (benefit) for the year ended December 31, 2025 and December 31, 2024 was as follows:
20252024
Current tax provision from continuing operations:
Federal
$(466)$3,554
State
(206)950
Total current tax provision from continuing operations(672)4,504
Deferred expense (benefit) from continuing operations:
Federal
(5,732)(171)
State
(1,489)(18)
Total deferred expense from continuing operations(7,221)(189)
Income tax expense (benefit) from continuing operations(7,893)4,315
Income tax benefit from discontinued operations$(23)
Total$(7,893)$4,292
The effective tax rate differed from the federal statutory rate of 21% in 2025 and 2024. The summary of the differences are as follows:
20252024
Federal tax based on federal corporate statutory rate$(6,474)21.0 %$3,571
Domestic state tax expense, net of federal benefit (1)
(1,340)4.4 %732
Changes resulting from:
BOLI income(158)0.5 %(150)
Nondeductible Expenses63(0.2)%93
Other, net16(0.1)%69
Income tax expense (benefit) from continuing operations(7,893)25.6 %4,315
Income tax benefit from discontinued operations— %(23)
Total income tax expense (benefit)$(7,893)25.6 %$4,292
(1) State taxes in Florida make up the majority (greater than 50%) of the tax expense in this category
Cash taxes paid for the year ended December 31, 2025 was as follows:
Cash Taxes Paid2025
Federal$4,250
State
Florida850
Other196
Total$5,296
Deferred tax assets and liabilities at December 31, 2025 and December 31, 2024 were due to the following:
20252024
Deferred tax assets:
Allowance for credit losses
$5,679$4,106
Net operating loss carryforward2,83316
Deferred loan fees
288
Discount on loans sold
1,0421,159
Unrealized loss on available for sale securities6511,032
Operating lease liabilities
3,3233,684
Accrued bonuses
288
Fair value adjustments on HFI government guaranteed loans and HFS loans
1,631311
Other
8411,050
Total gross deferred tax assets16,00011,934
Deferred tax liabilities:
Fair value adjustments on HFI government guaranteed loans and HFS loans
Government guaranteed loan servicing rights
(3,152)(4,197)
Deferred loan costs
(1,915)(2,955)
Right-of-use operating lease assets
(3,634)(4,015)
Depreciation
(761)(1,068)
Total gross deferred tax liabilities(9,462)(12,235)
Net deferred tax asset (liabilities)$6,538$(301)
At December 31, 2025, the Company had $11,144 federal net operating loss carryforward and $10,608 of state net operating loss carryforward. At December 31, 2024, the Company had no federal net operating loss carryforward and $16 of state net operating loss carryforward. The Company expects to fully utilize the net operating losses.
The Company follows the guidance of ASC Topic 740, Income Taxes, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As of December 31, 2025, the Company had no uncertain tax positions that it believes should be recognized in the financial statements. The tax years still subject to examination by taxing authorities are years subsequent to 2021.

Historical Timeline

Fiscal YearFiled
2025Mar 27, 2026Showing above
2024Mar 25, 2025
2023Mar 28, 2024
2022Mar 28, 2023
2021Mar 31, 2022

About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.