Princeton Bancorp, Inc. Income Taxes Disclosure
Note 10 – Income Taxes
Income tax expense for the years ended December 31 is as follows:
|
|
December 31, |
|
|
December 31, |
|
||
|
|
(In thousands) |
|
|||||
Current tax provision (benefit): |
|
|
|
|
|
|
||
Federal |
|
$ |
2,558 |
|
|
$ |
2,688 |
|
State |
|
|
550 |
|
|
|
693 |
|
Total current tax provision |
|
|
3,108 |
|
|
|
3,381 |
|
Deferred income tax provision (benefit): |
|
|
|
|
|
|
||
Federal |
|
|
1,266 |
|
|
|
(540 |
) |
State |
|
|
697 |
|
|
|
(267 |
) |
Total deferred tax provision (benefit) |
|
|
1,963 |
|
|
|
(807 |
) |
|
|
|
|
|
|
|
||
Total tax provision (benefit) |
|
$ |
5,071 |
|
|
$ |
2,574 |
|
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows as of December 31:
|
|
December 31, |
|
|
December 31, |
|
||
|
|
(In thousands) |
|
|||||
Deferred tax assets: |
|
|
|
|
|
|
||
Allowance for credit losses |
|
$ |
5,854 |
|
|
$ |
6,724 |
|
Net operating loss carry-forward |
|
|
5,093 |
|
|
|
5,651 |
|
Other |
|
|
1,164 |
|
|
|
1,279 |
|
Core deposit intangible |
|
|
478 |
|
|
|
466 |
|
Acquisition accounting adjustments |
|
|
5,060 |
|
|
|
5,728 |
|
Lease liability |
|
|
6,104 |
|
|
|
6,520 |
|
SERP liability |
|
|
438 |
|
|
|
418 |
|
Unrealized loss on securities |
|
|
2,090 |
|
|
|
3,546 |
|
Total deferred tax assets |
|
|
26,281 |
|
|
|
30,332 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
||
Depreciation |
|
|
(806 |
) |
|
|
(682 |
) |
Deferred loan costs |
|
|
(770 |
) |
|
|
(975 |
) |
ROU |
|
|
(5,795 |
) |
|
|
(6,225 |
) |
Goodwill amortization |
|
|
(1,119 |
) |
|
|
(937 |
) |
Other |
|
|
(934 |
) |
|
|
(1,237 |
) |
Total deferred tax liabilities |
|
|
(9,424 |
) |
|
|
(10,056 |
) |
Net deferred tax asset |
|
$ |
16,857 |
|
|
$ |
20,276 |
|
Total income taxes differed from the amount computed by applying the statutory federal income tax rate to pre-tax income as follows:
|
|
December 31, 2025 |
|
|
December 31, 2024 |
|
||||||||||
|
|
Amount |
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
||||
|
|
(Dollars in thousands) |
|
|||||||||||||
Federal income tax expense at statutory rate |
|
$ |
4,973 |
|
|
|
21.0 |
% |
|
$ |
2,691 |
|
|
|
21.0 |
% |
Increase in taxes resulting from: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
State income taxes, net of federal benefit |
|
|
985 |
|
|
|
4.2 |
% |
|
|
337 |
|
|
|
2.6 |
% |
Nontaxable or nondeductible items: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Tax-exempt income, net |
|
|
(414 |
) |
|
|
(1.7 |
)% |
|
|
(402 |
) |
|
|
(3.1 |
)% |
Income from bank-owned life insurance |
|
|
(255 |
) |
|
|
(1.1 |
)% |
|
|
(351 |
) |
|
|
(2.7 |
)% |
Other |
|
|
(218 |
) |
|
|
(1.0 |
)% |
|
|
299 |
|
|
|
2.3 |
% |
Total income taxes applicable to pre-tax income |
|
$ |
5,071 |
|
|
|
21.4 |
% |
|
$ |
2,574 |
|
|
|
20.1 |
% |
Income taxes paid were as follows:
|
|
2025 |
|
|
2024 |
|
||
|
|
(In thousands) |
|
|||||
Federal |
|
$ |
2,041 |
|
|
$ |
1,275 |
|
State |
|
|
|
|
|
|
||
New Jersey |
|
|
75 |
|
|
|
122 |
|
New York |
|
|
106 |
|
|
|
207 |
|
New York City |
|
|
30 |
|
|
|
216 |
|
Total income taxes paid |
|
$ |
2,252 |
|
|
$ |
1,820 |
|
The Company had available federal net operating loss carry-forwards of approximately $13.1 million and $14.2 million at December 31, 2025 and 2024, respectively, which begin to expire in 2029. The federal net operating loss carry-forwards are amounts that were generated by MoreBank, which the Bank acquired on September 30, 2010 and Noah Bank, which the Company acquired on May 19, 2023, and Cornerstone Financial, which the Bank acquired on August 23, 2024. These net operating losses are subject to an annual Internal Revenue Code Section 382 limitation of approximately $222 thousand for MoreBank net operating losses and $773 thousand for Noah Bank net operating losses, and $846 thousand for Cornerstone Financial net operating losses.
The Company had available New Jersey net operating loss carry-forwards of approximately $14.2 million, New York state net operating loss carry-forwards of $13.8 million and New York City net operating loss carry-forwards of $6.2 million at December 31, 2025, which expire between 2034 and 2043. The state and city net operating loss carry-forwards are amount that were generated by Noah Bank, which the Bank acquired on May 19, 2023 and Cornerstone Financial acquired on August 23, 2024.
Based on projections of future taxable income over periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences.
The Company follows applicable accounting guidance which prescribes a threshold for the financial statement recognition of income taxes and provides criteria for the measurement of tax positions taken or expected to be taken in a tax return. This also includes guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosure of income taxes. The Company did not recognize or accrue any interest or penalties related to income taxes during the years ended December 31, 2025, or 2024. The Company does not have an accrual for uncertain tax positions as of December 31, 2025, or 2024, as deductions taken or benefits accrued are based on widely understood administrative practices and procedures and are based on clear and unambiguous tax law. Generally, tax returns for all years 2022 and thereafter are subject to examination by tax authorities. The Company's New Jersey tax returns are currently under audit for tax years 2020 through 2023.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 13, 2026 | Showing above |
| 2024 | Mar 14, 2025 | |
| 2023 | Mar 25, 2024 | |
| 2022 | Mar 24, 2023 | |
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.