Hoyne Bancorp, Inc. Income Taxes Disclosure
11.Income Taxes
The components of income tax expense (benefit) for the years ended December 31, 2025 and 2024 are as follows:
Year Ended | Year Ended | |||||
| December 31, 2025 | | December 31, 2024 | |||
Current | $ | 332,591 | $ | 203,354 | ||
Deferred expense (benefit) |
| (556,360) |
| (1,238,070) | ||
Total expense (benefit) | $ | (223,769) | $ | (1,034,716) | ||
The difference between income tax expense (benefit) and the amount computed by applying the statutory federal income tax rate to income (loss) before taxes for the years ended December 31, 2025 and 2024 is as follows:
|
| ||||||
Year Ended | Year Ended | ||||||
| December 31, 2025 | | December 31, 2024 | ||||
Statutory Federal tax rate | 21 | % | 21 | % | |||
Pretax income at statutory rate | $ | 1,873 | $ | (628,432) | |||
State income tax, net of federal benefit |
| (71,012) |
| (280,506) | |||
Cash surrender value of life insurance |
| (137,787) |
| (126,634) | |||
Permanent adjustments |
| 18,245 |
| (111) | |||
Other |
| (35,088) |
| 967 | |||
Total expense (benefit) | $ | (223,769) | $ | (1,034,716) | |||
The following summarizes the sources and expected tax consequences of future deductions or income for income tax purposes which comprised the net deferred taxes at December 31, 2025 and 2024:
Year Ended | Year Ended | |||||
| December 31, 2025 | | December 31, 2024 | |||
Deferred income tax assets: | ||||||
Allowance for credit losses | $ | 764,453 | $ | 606,014 | ||
Accrued bonuses | 104,506 | 101,506 | ||||
Deferred loan fees |
| 300,636 |
| 216,499 | ||
Unrealized loss on AFS securities |
| 4,339,244 |
| 6,335,560 | ||
Net operating losses |
| 4,387,861 |
| 3,989,658 | ||
Other |
| 3,040 |
| 48,502 | ||
Total deferred income tax assets |
| 9,899,740 |
| 11,297,739 | ||
Deferred income tax liabilities: | ||||||
Premises and equipment |
| (341,366) |
| (79,678) | ||
Merger related activities |
| (114,335) |
| (304,735) | ||
FHLB Stock dividend |
| (78,263) |
| (78,263) | ||
Other | — |
| (29,331) | |||
Total deferred income tax liabilities |
| (533,964) |
| (492,007) | ||
Net deferred income tax asset | $ | 9,365,776 | $ | 10,805,732 | ||
11.Income Taxes (continued)
The Company establishes a valuation allowance if, based on the weight of the available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The Company is subject to federal income tax and income tax of state taxing authorities. The Company's federal and state income tax returns for the years ended December 31, 2025, 2024, 2023 and 2022 are open to audit under the statutes of limitations.
Included in income tax reserves was approximately $14,400,000 in bad debt reserves for which no deferred income tax liability had been recorded at December 31, 2020. The reserves represent bad debt reductions for tax purposes only. Reduction of these reserves for actual loan write-offs would create taxable income, which would be subjected to the current corporate income tax rate. There was no unrecorded deferred liability on this amount at December 31, 2025 and 2024. In 2022, the Bank’s average assets for the year exceeded $500,000,000, and as a result, the Bank is now classified as a large bank, which requires recapture of the tax bad debt reserves into taxable income in 2022, 2023, 2024 and 2025 under U.S. Treasury regulations. Federal and Illinois net operating losses, if available, can be used to offset these recaptures, except that the Illinois net loss deduction for Illinois income tax purposes is limited to $100,000 per year in 2022 and 2023 and $500,000 for 2024 and 2025. Under the guidance in Financial Accounting Standards Board Accounting Standards Codification 942-740, since the Bank is required to recapture the tax bad debt reserves, the Bank recognized the deferred tax liability in 2022.
Hoyne Bancorp, Inc. and Subsidiaries have federal net operating loss carryforwards of approximately $6,427,000, expiring in December 2033 to December 2036, and approximately $4,229,000 with indefinite expiration, available to offset future taxable income. Included in total federal net operating loss carryforwards are acquired net operating loss carryforwards of approximately $4,931,000 which are limited, under Section 382 IRC, for future utilization to approximately $585,000 per year during their carryforward years.
The Bank has state of Illinois net operating loss carryforwards of approximately $27,645,000 that will begin to expire in 2036.
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.