NorthEast Community Bancorp, Inc./MD/ Income Taxes Disclosure
Note 14 - Income Taxes
The Bank qualifies as a savings institution under the provisions of the Internal Revenue Code and was, therefore, prior to January 1, 1996, permitted to deduct from taxable income an allowance for bad debts based upon eight percent of taxable income before such deduction, less certain adjustments. Retained earnings at December 31, 2025 and 2024, include approximately $4.1 million of such bad debt deductions which, in accordance with U.S. GAAP is considered a permanent difference between the book and income tax basis of loans receivable, and for which deferred income taxes have not been provided. If such amount is used for purposes other than for bad debt losses, including distributions in liquidation, it will be subject to income tax at the then current rate.
The components of provision for income taxes are summarized as follows:
Years Ended December 31, | ||||||
| 2025 | | 2024 | |||
(In Thousands) | ||||||
Current tax expense | $ | 17,520 | $ | 19,166 | ||
Deferred tax expense |
| 326 |
| (467) | ||
$ | 17,846 | $ | 18,699 | |||
Note 14 - Income Taxes (continued)
The following table presents a reconciliation between the reported income taxes and the income taxes, which would be computed by applying the existing federal income tax rate of 21% for 2025 and 2024 to income before taxes:
Years Ended December 31, |
| ||||||||||||
| 2025 | | 2024 |
| |||||||||
(Dollars In Thousands) | Amount | Rate | Amount | Rate |
| ||||||||
Federal income tax at statutory rates | $ | 13,074 | 21 | % | $ | 13,812 | 21 | % | |||||
State and city tax, net of federal income tax effect¹ |
| 4,743 | 8 |
| 4,725 | 7 | |||||||
Non-taxable income on bank owned life insurance |
| (146) | (0) |
| (138) | (0) | |||||||
Other |
| 175 | 0 |
| 300 | 0 | |||||||
$ | 17,846 | 29 | % | $ | 18,699 | 28 | % | ||||||
| (1) | For the years presented New York State, New York City, and Massachusetts make up 100% of the tax effect in this category. |
The tax effects of significant items comprising the net deferred tax assets are as follows:
December 31, | ||||||
| 2025 | | 2024 | |||
(In Thousands) | ||||||
Deferred tax assets: | ||||||
Allowance for credit losses | $ | 1,219 | $ | 1,245 | ||
State net operating loss carryforwards |
| — |
| 13 | ||
Benefit plans |
| 2,881 |
| 2,652 | ||
Accumulated other comprehensive loss – DRP |
| 69 |
| 72 | ||
Other |
| 292 |
| 842 | ||
Total Deferred Tax Assets |
| 4,461 |
| 4,824 | ||
Deferred tax liability: |
| |
| | ||
Depreciation |
| 423 |
| 457 | ||
Total Deferred Tax Liabilities |
| 423 |
| 457 | ||
Net Deferred Tax Assets Included in Other Assets | $ | 4,038 | $ | 4,367 | ||
At December 31, 2025, the Company had no valuation allowance because the Company determined there will be enough future taxable income to utilize the deferred tax assets.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 13, 2026 | Showing above |
| 2024 | Mar 14, 2025 | |
| 2023 | Mar 28, 2024 | |
| 2022 | Mar 30, 2023 | |
| 2021 | Mar 30, 2022 | |
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.