OHIO VALLEY BANC CORPOVBC

OHIO VALLEY BANC CORP Income Taxes Disclosure

10-KFiled Mar 14, 20252 min read
Note K - Income Taxes

The provision for income taxes consists of the following components:

   
2024
    
2023
  
Current tax expense
  
$
3,557
    
$
3,312
  
Deferred tax (benefit) expense
    
(1,180
)
    
(745
)
Total income tax expense
  
$
2,377
    
$
2,567
  


The source of deferred tax assets and deferred tax liabilities at December 31:

   
2024
    
2023
  
Items giving rise to deferred tax assets:
            
Other reserves
   $ 130     $ 152  
Allowance for credit losses
    
2,240
      
1,916
  
Unrealized loss on securities available for sale
     2,966       3,233  
Deferred compensation
    
2,295
      
2,176
  
Deferred loan fees/costs
    
172
      
169
  
Accrued bonus
    
325
      
249
  
Purchase accounting adjustments
    
62
      
11
  
Net operating loss
    
32
      
49
  
Lease liability
    
293
      
332
  
Nonaccrual interest income
     109       113  
Other
    
58
      
43
  
Items giving rise to deferred tax liabilities:
                
Mortgage servicing rights
    
(79
)
    
(88
)
FHLB stock dividends
    
(434
)
    
(442
)
Prepaid expenses
    
(33
)
    
(35
)
Depreciation and amortization
    
(344
)
    
(841
)
Right-of-use asset
    
(293
)
    
(332
)
Other
     (281 )     (399 )
Net deferred tax asset
  
$
7,218
    
$
6,306
  


The Company determined that it was not required to establish a valuation allowance for deferred tax assets since management believes that the deferred tax assets are likely to be realized through the future reversals of existing taxable temporary differences, deductions against forecasted income and tax planning strategies.


At December 31, 2024, the Company’s deferred tax asset related to Section 382 net operating loss carryforwards was $152, which will expire in 2026.


The difference between the financial statement tax provision and amounts computed by applying the statutory federal income tax rate of 21% to income before taxes is as follows:

   
2024
    
2023
  
Statutory tax (21%)
 
$
2,809
    
$
3,192
  
Effect of nontaxable interest, net
    
(422
)
    
(468
)
Effect of nontaxable insurance premiums
    
—
      
(205
)
Income from bank owned life insurance, net
    
(186
)
    
(136
)
Effect of state income tax, net of federal benefit
    
119
      
170
  
Tax credits
    
(31
)
    
(25
)
Other
    
88
      
39
  
Total income taxes (1)
  
$
2,377
    
$
2,567
  

(1) Effective income tax rate was 17.8% for 2024 and 16.9% for 2023


At December 31, 2024 and December 31, 2023, the Company had no unrecognized tax benefits. The Company does not expect the amount of unrecognized tax benefits to significantly change within the next twelve months. The Company did not recognize any interest and/or penalties related to income tax matters for the periods presented.


The Company is subject to U.S. federal income tax as well as West Virginia state income tax. The Company is no longer subject to federal or state examination for years prior to 2021.
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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.

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