ECB Bancorp, Inc. /MD/ Income Taxes Disclosure

NOTE 11 – INCOME TAXES

 

The components of income tax expense are as follows for the years ended December 31:

 

		2025				2024
		(in thousands)
Current:
Federal		$	2,026			$	1,193
State			827				437
			2,853				1,630
Deferred:
Federal			(162	)			(185	)
State			(113	)			(65	)
Change in valuation allowance			29				—
			(246	)			(250	)
Total income tax expense		$	2,607			$	1,380

 

The reasons for the differences between the statutory federal income tax rate and the effective tax rates are summarized as follows for the years ended December 31:

 

		2025								2024
		(dollars in thousands)
Statutory tax rates		$	2,180				21.0	%		$	1,128				21.0	%
Increase (decrease) in tax resulting from:
State tax, net of federal tax benefit			564				5.4				300				5.6
Bank-owned life insurance			(100	)			(1.0	)			(99	)			(1.8	)
Stock-based compensation			52				0.5				54				1.0
Tax credits			(131	)			(1.3	)			—				—
Change in valuation allowance			29				0.3				—				—
Other, net			13				0.2				(3	)			(0.1	)
Effective tax rates		$	2,607				25.1	%		$	1,380				25.7	%

 

The Company had gross deferred tax assets and gross deferred tax liabilities as follows as of December 31:

 

		2025				2024
		(in thousands)
Deferred tax assets:
Allowance for credit losses		$	3,083			$	2,676
Employee benefit plans			2,504				2,375
ESOP			91				60
Lease liability			17				14
Net unrealized holding loss on available-for-sale securities			—				12
Interest on non-performing loans			4				10
Charitable contribution carryover			79				391
Stock-based compensation			82				—
Cash flow hedge			450				—
Other			—				66
Valuation allowance			(29	)			—
Gross deferred tax assets			6,281				5,604
Deferred tax liabilities:
Depreciation			(272	)			(308	)
Unrecognized employee benefit costs under ASC 715-10			(32	)			(57	)
Net deferred loan costs			(246	)			(184	)
Stock-based compensation			—				(33	)
Net unrealized holding gain on available-for-sale securities			(64	)			—
Cash flow hedge			—				(108	)
Gross deferred tax liabilities			(614	)			(690	)
Net deferred tax asset		$	5,667			$	4,914

 

The federal income tax reserve for credit losses at the Company’s base year amounted to $1,876,000 as of December 31, 2025 and 2024. If any portion of the reserve is used for purposes other than to absorb the losses for which it was established, approximately 150% of the amount actually used (limited to the amount of the reserve) would be subject to taxation in the year it is used. As the Company intends to use the reserve only to absorb credit losses, a deferred income tax liability of approximately $527,000 has not been provided as of December 31, 2025 and 2024.

 

At December 31, 2025 and December 31, 2024, the Company had a charitable contribution carryover of $160,000 and $1,356,000, respectively, which expires on December 31, 2027. Valuation allowance recorded against the related deferred tax assets was $29,000 for the year ended December 31, 2025. There was no valuation allowance recorded for the year ended December 31, 2024.