Esquire Financial Holdings, Inc. Income Taxes Disclosure
NOTE 8 — Income Taxes
The following summarizes components of income tax expense for the years ended December 31:
|
| 2024 |
| 2023 |
| 2022 | |||
Current: |
|
|
|
|
|
| |||
Federal expense | $ | 12,889 | $ | 13,066 | $ | 8,795 | |||
State and city expense |
| 3,839 |
| 4,356 |
| 2,821 | |||
Total current tax expense |
| 16,728 |
| 17,422 |
| 11,616 | |||
Deferred: |
|
|
|
|
|
| |||
Federal benefit |
| (1,097) |
| (1,874) |
| (807) | |||
State and city benefit |
| (8) |
| (677) |
| (526) | |||
Total deferred tax benefit |
| (1,105) |
| (2,551) |
| (1,333) | |||
Income tax expense | $ | 15,623 | $ | 14,871 | $ | 10,283 | |||
The following is a reconciliation of the Company’s statutory federal income tax rate of 21% to its effective tax rate at December 31:
|
| 2024 |
| 2023 |
| 2022 | |||
Federal tax expense at statutory rate | $ | 12,449 | $ | 11,735 | $ | 8,148 | |||
State and local income taxes, net of federal income tax benefit |
| 2,878 |
| 2,867 |
| 1,948 | |||
Incentive stock options |
| 114 |
| 95 |
| 63 | |||
Stock-based compensation excess tax benefit |
| (770) |
| (356) |
| (317) | |||
Research and development tax credits |
| (150) |
| (150) |
| (100) | |||
Other |
| 1,102 |
| 680 |
| 541 | |||
Income tax expense | $ | 15,623 | $ | 14,871 | $ | 10,283 | |||
The following summarizes the components of the Company’s deferred tax assets and deferred tax liabilities at December 31:
|
| 2024 |
| 2023 | ||
Deferred tax assets: |
|
|
|
| ||
Net operating loss carry forwards | $ | — | $ | 71 | ||
Stock based compensation |
| 1,469 |
| 1,271 | ||
Allowance for credit losses |
| 5,541 |
| 4,535 | ||
Deferred loan fees, net |
| — |
| 191 | ||
Unrealized loss on securities available-for-sale |
| 5,419 |
| 5,020 | ||
Other |
| 2,565 |
| 1,957 | ||
Total deferred tax assets |
| 14,994 |
| 13,045 | ||
Deferred tax liabilities: |
|
|
|
| ||
Fixed assets |
| (1,736) |
| (1,316) | ||
Investment in partnership |
| (45) |
| (104) | ||
Deferred loan fees, net |
| (84) |
| — | ||
Total deferred tax liabilities |
| (1,865) |
| (1,420) | ||
Deferred tax asset, net | $ | 13,129 | $ | 11,625 | ||
The Company no longer has New York state and city net operating loss carryforwards as of December 31, 2024.
Realization of deferred tax assets is dependent upon the generation of future taxable income. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. Based on its evaluation, the Company has determined that it is more likely than not that the deferred tax asset as of December 31, 2024 and 2023, will be realized.
The Company does not have any unrecognized tax benefits at December 31, 2024 and 2023, and does not expect this to increase in the next twelve months. There were no interest and penalties recorded in the Consolidated Statements of Income for the years ended December 31, 2024, 2023 and 2022. The Company is subject to U.S. federal income tax as well as income tax in 10 state and local jurisdictions. The Company is no longer subject to examination by taxing authorities for years before 2022.
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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.