INCOME TAXES
Reconciliation of income tax provision for the periods indicated are as follows:
| | | | | | | | | | | |
| Year Ended December 31, | 2024 | | 2023 |
| (Dollars in Thousands) | | | |
| | | |
| Current Expense | $ | 2,558 | | | $ | 7,353 | |
| Deferred Expense (Benefit) | 191 | | | 382 | |
| Total Provision | $ | 2,749 | | | $ | 7,735 | |
The tax effects of deductible and taxable temporary differences that gave rise to significant portions of the net deferred tax assets and liabilities are as follows:
| | | | | | | | | | | |
| December 31, | 2024 | | 2023 |
| (Dollars in Thousands) | | | |
| | | |
| Deferred Tax Assets: | | | |
| Allowance for Credit Losses | $ | 2,233 | | | $ | 2,175 | |
| Nonaccrual Loan Interest | 53 | | | 57 | |
| | | |
| | | |
| Purchase Accounting Adjustments | 289 | | | 53 | |
| Postretirement Benefits | 16 | | | 18 | |
| Net Unrealized Loss on Debt Securities | 4,666 | | | 4,599 | |
| Net Unrealized Loss on Equity Securities | 11 | | | 22 | |
| Stock-Based Compensation Expense | 109 | | | 98 | |
| Gas Lease - Deferred Revenue | — | | | 4 | |
| Accrued Payroll | 107 | | | 260 | |
| OREO | — | | | 8 | |
| | | |
| Lease Liability | 607 | | | 380 | |
| | | |
| | | |
| Restructuring Costs | 88 | | | 88 | |
| Other | 93 | | | 24 | |
| | | |
| | | |
| Gross Deferred Tax Assets | 8,272 | | | 7,786 | |
| | | |
| Deferred Tax Liabilities: | | | |
| Amortization of Intangibles | 73 | | | 73 | |
| Deferred Origination Fees and Costs | 306 | | | 313 | |
| Discount Accretion | 69 | | | 41 | |
| | | |
| Depreciation | 2,030 | | | 1,588 | |
| | | |
| | | |
| Mortgage Servicing Rights | 99 | | | 115 | |
| | | |
| ROU Asset | 587 | | | 357 | |
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| | | |
| | | |
| | | |
| | | |
| Gross Deferred Tax Liabilities | 3,164 | | | 2,487 | |
| Net Deferred Tax Assets | $ | 5,108 | | | $ | 5,299 | |
Deferred taxes at December 31, 2024 and 2023, are included in Accrued Interest Receivable and Other Assets in the accompanying Consolidated Statements of Financial Condition.
A reconciliation of the federal income tax expense at statutory income tax rates and the actual income tax expense on income before taxes for the periods indicated is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| 2024 | | 2023 |
| Year Ended December 31, | Amount | | Percent of Pre-tax Income | | Amount | | Percent of Pre-tax Income |
| (Dollars in Thousands) | | | | | | | |
| | | | | | | |
| Provision at Statutory Rate | $ | 3,222 | | | 21.0 | % | | $ | 6,360 | | | 21.0 | % |
| State Taxes (Net of Federal Benefit) | 47 | | | 0.3 | | | 2,014 | | | 6.7 | |
| Tax-Free Income | (282) | | | (1.8) | | | (262) | | | (0.9) | |
| BOLI Income | (125) | | | (0.8) | | | (121) | | | (0.4) | |
| | | | | | | |
| Stock Options - ISO | 25 | | | 0.2 | | | 44 | | | 0.1 | |
| | | | | | | |
| | | | | | | |
| Other | (138) | | | (1.0) | | | (300) | | | (1.0) | |
| Actual Tax Expense and Effective Rate | $ | 2,749 | | | 17.9 | % | | $ | 7,735 | | | 25.5 | % |
The Company’s federal, Pennsylvania and West Virginia income tax returns are no longer subject to examination by applicable tax authorities for years before 2021. As of December 31, 2024 and 2023, there were no unrecognized tax benefits. The Company recognizes interest accrued related to unrecognized tax benefits in noninterest income and penalties in noninterest expense. There were no interest or penalties accrued at December 31, 2024 and 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.