PEOPLES BANCORP OF NORTH CAROLINA INC Income Taxes Disclosure
(9) Income Taxes
The provision for income taxes is summarized as follows:
(Dollars in thousands) |
|
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|
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|
| 2025 |
|
| 2024 |
| ||
Current income tax expense |
|
|
|
|
|
| ||
Federal |
| $ | 5,032 |
|
|
| 3,081 |
|
State |
|
| 556 |
|
|
| 464 |
|
|
|
| 5,588 |
|
|
| 3,545 |
|
Deferred income tax expense (benefit) |
|
|
|
|
|
|
|
|
Federal |
|
| 197 |
|
|
| 693 |
|
State |
|
| 235 |
|
|
| 338 |
|
|
|
| 432 |
|
|
| 1,031 |
|
|
|
|
|
|
|
|
|
|
Total income tax expense |
| $ | 6,020 |
|
|
| 4,576 |
|
The following is a reconciliation of the statutory federal income tax expense to the Company’s effective tax rate:
| (Dollars in thousands) |
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| 2025 |
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| 2024 |
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| Tax-expense at the statutory rate |
| $ | 5,428 |
|
|
| 21.0 | % |
|
| 4,398 |
|
|
| 21.0 | % |
| State income tax, net of federal income tax effect |
|
| 685 |
|
|
| 2.6 | % |
|
| 635 |
|
|
| 3.0 | % |
| Increases (decreases): |
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|
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| Tax credits |
|
| (10 | ) |
|
| 0.0 | % |
|
| (10 | ) |
|
| -0.1 | % |
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| Nontaxable and nondeductible items, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Tax-exempt income |
|
| (98 | ) |
|
| -0.4 | % |
|
| (114 | ) |
|
| -0.5 | % |
| Increase in cash surrender value of life insurance |
|
| (126 | ) |
|
| -0.5 | % |
|
| (165 | ) |
|
| -0.7 | % |
Nondeductible interest and other expense |
|
| 20 |
|
|
| 0.1 | % |
|
| 24 |
|
|
| 0.1 | % |
| Other |
|
| 44 |
|
|
| 0.2 | % |
|
| 0 |
|
|
| 0.0 | % |
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| Other |
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|
|
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|
|
|
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| Interest received related to tax position |
|
| - |
|
|
| 0.0 | % |
|
| (260 | ) |
|
| -1.2 | % |
| Other |
|
| 77 |
|
|
| 0.3 | % |
|
| 68 |
|
|
| 0.3 | % |
|
|
|
|
|
|
|
|
|
|
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|
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|
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| Total income tax expenses |
| $ | 6,020 |
|
|
| 23.3 | % |
|
| 4,576 |
|
|
| 21.9 | % |
State taxes in North Carolina made up the majority (greater than 50%) of the tax effect in the table above.
The following summarizes the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities. The net deferred tax asset is included as a component of other assets at December 31, 2025 and 2024.
| (Dollars in thousands) |
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|
|
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|
| 2025 |
|
| 2024 |
| ||
Deferred tax assets: |
|
|
|
|
|
| ||
Allowance for credit losses |
| $ | 2,603 |
|
|
| 2,485 |
|
Accrued retirement expense |
|
| 1,251 |
|
|
| 1,215 |
|
Other real estate |
|
| 7 |
|
|
| - |
|
Restricted stock |
|
| 238 |
|
|
| 238 |
|
Interest income on nonaccrual loans |
|
| 2 |
|
|
| 4 |
|
Lease liability |
|
| 816 |
|
|
| 926 |
|
Unrealized loss on available for sale securities |
|
| 7,649 |
|
|
| 11,412 |
|
Total gross deferred tax assets |
|
| 12,566 |
|
|
| 16,280 |
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Deferred loan fees |
|
| 103 |
|
|
| 160 |
|
Accumulated depreciation |
|
| 956 |
|
|
| 375 |
|
Prepaid expenses |
|
| 379 |
|
|
| 296 |
|
ROU Asset |
|
| 786 |
|
|
| 899 |
|
Other |
|
| 99 |
|
|
| 259 |
|
Total gross deferred tax liabilities |
|
| 2,323 |
|
|
| 1,989 |
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset |
| $ | 10,243 |
|
|
| 14,291 |
|
The following table presents cash paid for federal and state income taxes net of refunds:
| (Dollars in thousands) |
|
|
|
|
|
| ||
|
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
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| Federal |
| $ | 4,350 |
|
|
| 3,788 |
|
| State: |
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|
|
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|
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| North Carolina |
|
| 446 |
|
|
| 673 |
|
Other |
|
| 67 |
|
|
| 77 |
|
| Total State |
|
| 513 |
|
|
| 750 |
|
|
|
|
|
|
|
|
|
|
| Total income taxes paid, net of refunds received |
| $ | 4,863 |
|
|
| 4,538 |
|
The Company has analyzed the tax positions taken or expected to be taken in its tax returns and has concluded that it has no liability related to uncertain tax positions.
As of December 31, 2025, the Company’s Federal income tax filings for years 2022 through 2024 are open to examination by the Internal Revenue Service. The Company’s North Carolina income tax returns for years 2022 through 2024 are open to examination by the North Carolina Department of Revenue.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 11, 2026 | Showing above |
| 2024 | Mar 12, 2025 | |
| 2023 | Mar 7, 2024 | |
| 2022 | Mar 17, 2023 | |
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.