Income Taxes (As Restated)

12 Months Ended

Dec. 31, 2024

Income Taxes (As Restated) [Abstract]

Note 15 – Income Taxes (As Restated)

The Company and its subsidiary are subject to U.S. federal and state income taxes. Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply 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 in the period that includes the enactment date.

Income tax expense (benefit) was as follows:

	2024			2023
	(In thousands)
Current
Federal	$	505		$	300
State		504			398
Deferred
Federal		12			968
State		(206	)		241
Total	$	815		$	1,907

Effective tax rates differ from the federal statutory rate of 21% applied to income before income taxes due to the following:

	2024			2023
	(In thousands)
Federal statutory rate times pre-tax net income	$	581		$	1,314
Effect of:
State taxes, net of federal benefit		211			512
Earnings from bank owned life insurance		(10	)		(9	)
Low-income housing credits		–			–
Change in valuation allowance		–			80
Tax effect of stock-based compensation		38			14
Other, net		(5	)		(4	)
Total	$	815		$	1,907

Year‑end deferred tax assets and liabilities were due to the following:

	2024			2023
	(In thousands)
Deferred tax assets:
Allowance for credit losses	$	2,408		$	2,086
Accrued liabilities		483			580
State income taxes		108			30
Stock compensation		196			196
Net operating loss carryforward		1,880			1,982
Partnership investment		292			340
General business credit		1,544			1,962
Alternative minimum tax credit		–			11
Net unrealized loss on securities available-for-sale		4,864			5,815
Right of use liability		127			196
Fair value adjustment on acquired loans		100			223
Other		166			212
Total deferred tax assets		12,168			13,633
Less: valuation allowance		(449	)		(449	)
Total deferred tax assets, net of valuation allowance		11,719			13,184
Deferred tax liabilities:
Section 481 adjustments to bad debts		–			–
Deferred loan fees/costs		(1,273	)		(1,743	)
Basis difference on fixed assets		(708	)		(748	)
FHLB stock dividends		(54	)		(98	)
Nonaccrual loan interest		–			–
Prepaid expenses		(172	)		(180	)
Right of use assets		(121	)		(189	)
Core deposit intangibles		(511	)		(610	)
Total deferred tax liabilities		(2,839	)		(3,568	)
Net deferred tax assets	$	8,880		$	9,616

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management evaluated both positive and negative evidence, the amount of taxes paid in available carry‑back years, and the forecasts of future income and tax planning strategies. Based on this analysis, management determined that, as of December 31, 2024, a valuation allowance of $449 thousand was required on the Company’s deferred tax assets, which totaled $8.9 million (net of valuation allowance). As of December 31, 2023, a valuation allowance of $449 thousand was required on the Company’s deferred tax assets, which totaled $9.6 million (net of valuation allowance).

As of December 31, 2024, the Company had California net operating loss carryforwards of $22.0 million which will begin to expire in 2032 if not utilized. The Company also had federal general business credits of $1.5 million, which will begin to expire in 2033 if not utilized.

The Company did not have any unrecognized tax benefits as of December 31, 2024 or 2023.

2024 is the most recent tax year for which the Company has filed federal and state income or franchise tax returns. Federal tax years 2021 through 2023 remain open for the assessment of Federal income tax. California tax years 2020 through 2023 remain open for the assessment of California franchise tax. Washington, D.C. tax years 2021 through 2023 remain open for the assessment of D.C. franchise tax. The Company is not currently under examination by any tax authorities.

- Definition

The entire disclosure for income tax.

+ References

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+ Details

BROADWAY FINANCIAL CORP \DE\ 10-K/A