Sound Financial Bancorp, Inc. Income Taxes Disclosure
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Current | $ | 1,279 | $ | 2,028 | |||||||
| Deferred | (273) | (467) | |||||||||
| Total tax expense | $ | 1,006 | $ | 1,561 | |||||||
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Provision at statutory rate | $ | 1,186 | $ | 1,894 | |||||||
| Tax-exempt income | (125) | (126) | |||||||||
BOLI | (131) | (248) | |||||||||
| Other | 76 | 41 | |||||||||
| $ | 1,006 | $ | 1,561 | ||||||||
| Federal Tax Rate | 21.0 | % | 21.0 | % | |||||||
| Tax exempt rate | (2.2) | (1.4) | |||||||||
BOLI | (2.3) | (2.7) | |||||||||
| Other | 1.3 | 0.5 | |||||||||
| Effective tax rate | 17.8 | % | 17.4 | % | |||||||
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Deferred tax assets | |||||||||||
| Deferred compensation and supplemental retirement | $ | 601 | $ | 499 | |||||||
| Equity based compensation | 90 | 165 | |||||||||
| Intangible assets | 25 | 29 | |||||||||
| Depreciation | 54 | — | |||||||||
| Lease liabilities | 843 | 1,012 | |||||||||
| Unrealized loss on securities | 278 | 263 | |||||||||
| Allowance for loan losses | 1,784 | 1,840 | |||||||||
| Other, net | 101 | 47 | |||||||||
| Total deferred tax assets | 3,776 | 3,855 | |||||||||
| Deferred tax liabilities | |||||||||||
| Prepaid expenses | (160) | (171) | |||||||||
| FHLB stock dividends | (40) | (40) | |||||||||
| Depreciation | — | (39) | |||||||||
| Mortgage servicing rights | (308) | (405) | |||||||||
| Deferred loan costs | (594) | (652) | |||||||||
| Right of use assets | (782) | (944) | |||||||||
| Total deferred tax liabilities | (1,884) | (2,251) | |||||||||
| Net deferred tax asset | $ | 1,892 | $ | 1,604 | |||||||
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.