LANDMARK BANCORP INC Income Taxes Disclosure

(16) Income Taxes

 

Income tax expense attributable to income from operations consisted of the following:

Schedule of Components of Income Tax Expense (Benefit)  

		2025				2024				2023
(Dollars in thousands)		Years ended December 31,
		2025				2024				2023
Current:
Federal		$	3,851			$	2,012			$	1,711
State			563				(714	)			(161	)
Total current			4,414				1,298				1,550
Deferred:
Federal			(215	)			(120	)			295
State			245				(71	)			56
Total deferred			30				(191	)			351
Deferred tax valuation allowance			(166	)			(21	)			53
Income tax expense		$	4,278			$	1,086			$	1,954

 

The Company did not have any income tax expense in foreign jurisdictions for the years ended December 31, 2025, 2024 or 2023.

 

A reconciliation between reported income tax expense and the amounts computed by applying the U.S. federal statutory income tax rate of 21% to earnings before income taxes is as follows:

Schedule of Effective Income Tax Rate Reconciliation  

		Amount				Percent				Amount				Percent				Amount				Percent
(Dollars in thousands)		Years ended December 31,
		2025								2024								2023
		Amount				Percent				Amount				Percent				Amount				Percent
U.S. Federal income tax expense computed at the statutory rate		$	4,841				21.0	%		$	2,958				21.0	%		$	2,980				21.0	%
Domestic federal
Tax credits, net (1)			(155	)			(0.7	)			(116	)			(0.8	)			(47	)			(0.3	)
Nontaxable and nondeductible items
Tax-exempt interest, net			(530	)			(2.3	)			(556	)			(3.9	)			(592	)			(4.2	)
Other, net			(385	)			(1.7	)			(564	)			(4.0	)			(346	)			(2.4	)
Domestic state and local income taxes, net of federal effect
State income taxes, net of federal benefit (2)			668				3.0				401				2.8				476				3.3
Reversal of unrecognized tax benefits, net			(161	)			(0.7	)			(1,037	)			(7.4	)			(517	)			(3.6	)
Income tax (benefit) expense		$	4,278				18.6	%		$	1,086				7.7	%		$	1,954				13.8	%

 

(1)		Includes tax credits, other tax benefits, and certain costs associated with tax-advantaged investments.
(2)		State and local taxes in Kansas and Missouri made up the majority (greater than 50%) of the tax effect in this category.

 

 

The tax effects of temporary differences that give rise to the significant portions of the deferred tax assets and liabilities at the following dates were as follows:

Schedule of Deferred Tax Assets and Liabilities   

		2025				2024
(Dollars in thousands)		As of December 31,
		2025				2024
Deferred tax assets:
Loans, including allowance for credit losses		$	3,077			$	3,280
Unrealized loss on investment securities available-for-sale			1,817				5,056
State taxes			486				494
Other, net			209				297
Deferred compensation arrangements			202				63
Net deferred loan fees			175				140
Acquisition costs			58				79
Net operating loss carry forwards			47				213
Total deferred tax assets			6,071				9,622
Less valuation allowance			(47	)			(213	)
Total deferred tax assets, net of valuation allowance			6,024				9,409
Deferred tax liabilities:
Intangible assets			1,238				1,252
Mortgage servicing rights			670				643
Premises and equipment, net of depreciation			488				601
Prepaid expenses			461				669
Investments			138				99
FHLB stock dividends			31				49
Total deferred tax liabilities			3,026				3,313
Net deferred tax asset		$	2,998			$	6,096

 

The Company had Kansas corporate and privilege tax net operating loss carry forwards totaling $994,000 and $4.5 million as of December 31, 2025 and 2024, respectively, which expire between 2026 and 2027, for which the Company has recorded a valuation allowance of $47,000. A valuation allowance related to the remaining deferred tax assets other than net operating loss carry forwards has not been provided because management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets at December 31, 2025.

 

Retained earnings at December 31, 2025 and 2024 include approximately $6.3 million for which no provision for federal income tax had been made. This amount represents allocations of income to bad debt deductions in years prior to 1988 for tax purposes only. Reduction of amounts allocated for purposes other than tax bad debt losses will create income for tax purposes only, which will be subject to the then current corporate income tax rate.

 

The Company has unrecognized tax benefits representing tax positions for which a liability has been established. A reconciliation of the beginning and ending amount of the liability relating to unrecognized tax benefits is as follows:

Schedule of Unrecognized Tax Benefits   

		2025				2024
(Dollars in thousands)		Years ended December 31,
		2025				2024
Unrecognized tax benefits at beginning of year		$	1,487			$	2,040
Gross increases to current year tax positions			561				495
Gross decreases to prior year’s tax positions			(17	)			(73	)
Lapse of statute of limitations			(264	)			(975	)
Unrecognized tax benefits at end of year		$	1,767			$	1,487

 

Tax years that remain open and subject to audit include the years 2021 through 2025 for both federal and state tax purposes. The Company recognized $264,000 and $975,000 of previously unrecognized tax benefits during 2025 and 2024, respectively. The gross unrecognized tax benefits of $1.8 million and $1.5 million at December 31, 2025 and 2024, respectively, would favorably impact the effective tax rate by $1.4 million and $1.2 million, respectively, if recognized. During 2025, the Company recorded income tax expense of $76,000 associated with interest and penalties. For 2024 and 2023, the Company recorded an income tax benefit of $209,000 and $51,000, respectively, associated with interest and penalties. As of December 31, 2025 and 2024, the Company had accrued interest and penalties related to the unrecognized tax benefits of $387,000 and $311,000, respectively, which are not included in the table above.

 

 

Income taxes paid, net of refunds are as follows:

 

Schedule of Income Taxes Paid, Net of Refunds 

		2025				2024				2023
(Dollars in thousands)		Years ended December 31,
		2025				2024				2023
U.S. Federal		$	3,065			$	874			$	55
U.S. State and local
Kansas			336				(44	)			-
Other			23				4				-
Total U.S. State and local			23				4				-
Total taxes paid, net of refunds		$	3,424			$	834			$	55