Pathfinder Bancorp, Inc. Income Taxes Disclosure
NOTE 17: Income Taxes
The provision for (benefit from) income taxes for the years ended December 31, is as follows:
(In thousands) |
|
2024 |
|
|
2023 |
|
||
Current |
|
$ |
749 |
|
|
$ |
2,729 |
|
Deferred |
|
|
(417 |
) |
|
|
(367 |
) |
Total provision for income taxes |
|
$ |
332 |
|
|
$ |
2,362 |
|
The provision for income taxes includes the following
(In thousands) |
|
2024 |
|
|
2023 |
|
||
Federal Income Tax |
|
$ |
166 |
|
|
$ |
2,295 |
|
State Income Tax |
|
|
166 |
|
|
|
67 |
|
Total provision for income taxes |
|
$ |
332 |
|
|
$ |
2,362 |
|
The components of the net deferred tax asset (liability), included in other assets on the accompanying Consolidated Statements of Condition as of December 31, are as follows:
(In thousands) |
|
2024 |
|
|
2023 |
|
||
Assets: |
|
|
|
|
|
|
||
Deferred compensation |
|
$ |
1,120 |
|
|
$ |
1,102 |
|
Allowance for credit losses |
|
|
4,720 |
|
|
|
4,423 |
|
Postretirement benefits |
|
|
32 |
|
|
|
31 |
|
Subordinated debt interest |
|
|
82 |
|
|
|
58 |
|
Loan origination fees |
|
|
415 |
|
|
|
150 |
|
Investment securities |
|
|
2,671 |
|
|
|
2,676 |
|
Stock-based compensation |
|
|
35 |
|
|
|
37 |
|
Lease Liabilities |
|
|
416 |
|
|
|
447 |
|
Other |
|
|
871 |
|
|
|
466 |
|
Total |
|
|
10,362 |
|
|
|
9,390 |
|
Liabilities: |
|
|
|
|
|
|
||
Prepaid pension |
|
|
(2,077 |
) |
|
|
(1,966 |
) |
Derivative instruments |
|
|
(146 |
) |
|
|
(17 |
) |
Depreciation |
|
|
(1,857 |
) |
|
|
(1,675 |
) |
Accretion |
|
|
(420 |
) |
|
|
(214 |
) |
Intangible assets |
|
|
(982 |
) |
|
|
(1,004 |
) |
Mortgage servicing rights |
|
|
(76 |
) |
|
|
(86 |
) |
Right-of-use assets |
|
|
(363 |
) |
|
|
(398 |
) |
Prepaid expenses and transaction fees |
|
|
(257 |
) |
|
|
(101 |
) |
Total |
|
|
(6,178 |
) |
|
|
(5,461 |
) |
Net deferred tax asset |
|
$ |
4,184 |
|
|
$ |
3,929 |
|
Realization of deferred tax assets is dependent upon the generation of future taxable income or the existence of sufficient taxable income within the statutory carry back period. A valuation allowance is provided when it is more likely than not that some portion, or all of the deferred tax assets, will not be realized. In assessing the need for a valuation allowance, management considers the scheduled reversal of the deferred tax liabilities, the level of historical taxable income and the projected future level of taxable income over the periods in which the temporary differences comprising the deferred tax assets will be deductible. Management determined there was no valuation allowance needed as of December 31, 2024 or 2023.
Deferred income tax assets and liabilities are determined using the liability method. Under this method, the net deferred tax asset or liability is recognized for their future tax consequences. This is attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis as well as net operating and capital loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date. If current available evidence about the future raises doubt about the likelihood of a deferred tax asset being realized, a valuation allowance is established. The judgment about the level of future taxable income, including that which is considered capital, is inherently subjective and is reviewed on a continual basis as regulatory and business factors change.
In 2024, the Company’s effective tax rate was 8.9%, as compared to 20.8% in 2023. A reconciliation of the federal statutory income tax rate of 21.0% to the effective income tax rate for the years ended December 31, is as follows:
|
|
2024 |
|
|
2023 |
|
|
||
Federal statutory income tax rate |
|
|
21.0 |
|
% |
|
21.0 |
|
% |
State tax, net of federal benefit |
|
|
3.9 |
|
|
|
0.4 |
|
|
Tax-exempt interest income |
|
|
(3.9 |
) |
|
|
(1.2 |
) |
|
Increase in value of bank owned life insurance less premiums paid |
|
|
(0.4 |
) |
|
|
(1.1 |
) |
|
Death benefit from bank owned life insurance proceeds |
|
|
(4.4 |
) |
|
|
|
|
|
Sale of subsidiary |
|
|
(2.3 |
) |
|
|
|
|
|
Federal credits |
|
|
(2.0 |
) |
|
|
(0.6 |
) |
|
Other |
|
|
(3.0 |
) |
|
|
1.5 |
|
|
Effective income tax rate - Pathfinder Bancorp, Inc. |
|
|
8.9 |
|
% |
|
20.0 |
|
% |
Noncontrolling interest |
|
|
- |
|
|
|
0.8 |
|
|
Effective income tax rate |
|
|
8.9 |
|
% |
|
20.8 |
|
% |
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.