EAGLE FINANCIAL SERVICES INC Income Taxes Disclosure
NOTE 9. Income Taxes
The Company files income tax returns with the United States of America, the Commonwealth of Virginia and West Virginia. With few exceptions, the Company is no longer subject to federal, state, or local income tax examinations for years prior to 2021.
The net deferred tax asset at December 31, 2024 and 2023 consisted of the following components:
|
|
December 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
(in thousands) |
|
|||||
Deferred tax assets: |
|
|
|
|
|
|
||
Allowance for credit losses |
|
$ |
3,156 |
|
|
$ |
3,043 |
|
Reserve for unfunded commitments |
|
|
106 |
|
|
|
101 |
|
Share-based compensation |
|
|
306 |
|
|
|
327 |
|
Accrued postretirement benefits |
|
|
21 |
|
|
|
18 |
|
Home equity origination costs |
|
|
95 |
|
|
|
85 |
|
Accrued incentive benefit |
|
|
— |
|
|
|
89 |
|
Nonaccrual interest |
|
|
20 |
|
|
|
75 |
|
Lease liabilities |
|
|
2,054 |
|
|
|
977 |
|
Credit carryforward |
|
|
1,033 |
|
|
|
1,689 |
|
Securities available for sale |
|
|
4,956 |
|
|
|
4,790 |
|
Other |
|
|
— |
|
|
|
25 |
|
|
|
$ |
11,747 |
|
|
$ |
11,219 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
||
Property and equipment |
|
$ |
709 |
|
|
$ |
853 |
|
Right-of-use assets |
|
|
1,988 |
|
|
|
921 |
|
Loan servicing rights |
|
|
68 |
|
|
|
32 |
|
|
|
$ |
2,765 |
|
|
$ |
1,806 |
|
Net deferred tax asset |
|
$ |
8,982 |
|
|
$ |
9,413 |
|
The Company has not recorded a valuation allowance for deferred tax assets because management believes that it is more likely than not that they will be ultimately realized.
Income tax expense for the years ended December 31, 2024 and 2023 consisted of the following components:
|
|
December 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
(in thousands) |
|
|||||
Current tax expense |
|
$ |
2,958 |
|
|
$ |
2,785 |
|
Deferred tax accrual (benefit) |
|
|
600 |
|
|
|
(1,509 |
) |
|
|
$ |
3,558 |
|
|
$ |
1,276 |
|
The following table reconciles income tax expense to the statutory federal corporate income tax amount, which was calculated by applying the federal corporate income tax rate to pre-tax income for the years ended December 31, 2024 and 2023.
|
|
December 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
(in thousands) |
|
|||||
Statutory federal corporate tax amount |
|
$ |
3,969 |
|
|
$ |
2,232 |
|
Tax-exempt interest (income) |
|
|
(78 |
) |
|
|
(76 |
) |
Officer insurance (income) |
|
|
(404 |
) |
|
|
(134 |
) |
Net tax credits |
|
|
(53 |
) |
|
|
(756 |
) |
Other, net |
|
|
124 |
|
|
|
10 |
|
|
|
$ |
3,558 |
|
|
$ |
1,276 |
|
The effective tax rates were 18.82% and 12.00% for years ended December 31, 2024 and 2023, respectively, which were impacted by the recognition of tax-exempt life insurance income and qualified rehabilitation credits. For the year ended December 31, 2023, tax credits on qualified affordable housing project investments also had an impact on the effective tax rate. Qualified affordable housing project investments are further discussed in Note 25 to the Consolidated Financial Statements.
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.