v3.25.4
INCOME TAX
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAX INCOME TAX
The composition of income tax expense for the years ended December 31 follows:
202520242023
(In thousands)
Current expense$16,281 $17,504 $14,394 
Deferred expense (benefit)(3,531)(1,248)215 
Income tax expense$12,750 $16,256 $14,609 
We are subject to U.S. federal income taxes and are not subject to state or foreign income taxes. A reconciliation of income tax expense to the amount computed by applying the statutory federal income tax rate of 21% for 2025, 2024 and 2023 to the income before income tax for the years ended December 31 follows:
202520242023
(In thousands)
U.S. statutory rate applied to income before income tax
$17,071 21.0%$17,440 21.0%$15,472 21.0%
Tax credits
Purchased tax credits(1,836)(2.3)— —— —
Tax credit investments, net of amortization
(807)(1.0)(373)(0.5)(235)(0.3)
Nontaxable and nondeductible items
Tax-exempt interest income
(1,155)(1.4)(522)(0.6)(508)(0.7)
Bank owned life insurance(249)(0.3)(175)(0.2)(99)(0.1)
Non-deductible meals, entertainment and memberships114 0.183 0.177 0.1
Share-based compensation(323)(0.4)(130)(0.2)(50)(0.1)
Employee stock ownership plan dividends(116)(0.1)(108)(0.1)(106)(0.2)
Other, net51 0.141 0.158 0.1
Income tax expense$12,750 15.7%$16,256 19.6%$14,609 19.8%
In December, 2025, we executed a Tax Credit Transfer Agreement (TCTA) whereby we agreed to purchase $22.9 million of 2025 Section 48 tax credits at a purchase price of 92% of the tax credit amount. The purchase price of $21.1 million was paid by us to the seller, an independent third party on January 15, 2026. We plan to utilize the purchased tax credits of $22.9 million to offset amounts that otherwise would be due and payable to the IRS for 2025 and prior tax years. The accounting treatment at December 31, 2025 is an increase in income tax receivable from the Internal Revenue Service ("IRS") of $22.9 million (recorded in Accrued income and other assets in the Consolidated Statements of Financial Condition), a liability to the seller of $21.1 million (recorded in Accrued expenses and other liabilities in the Consolidated Statements of Financial Condition), and a reduction to income tax expense of $1.8 million in the Consolidated Statements of Operations for the year ending December 31, 2025. This $1.8 million is included in "Purchased tax credits" in the table above. The $21.1 million liability to the seller was paid on January 15, 2026.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31 follow:
20252024
(In thousands)
Deferred tax assets
Allowance for credit losses$13,323 $12,470 
Unrealized loss on securities AFS10,700 13,105 
Unrealized loss on securities HTM transferred from AFS2,726 3,396 
Incentive compensation1,839 2,052 
Lease liabilities1,581 1,331 
Property and equipment1,479 1,545 
Reserve for unfunded lending commitments1,142 1,078 
Share-based compensation1,082 861 
Deferred compensation645 621 
Non accrual loan interest income300 128 
Unrealized loss on derivative financial instruments
367 551 
Loss reimbursement on sold loans reserve252 260 
Other than temporary impairment charge on securities available for sale147 146 
Securities premium amortization91 831 
Gross deferred tax assets35,674 38,375 
Deferred tax liabilities
Capitalized mortgage loan servicing rights6,614 9,827 
Deferred loan fees2,256 2,245 
Lease right of use asset1,532 1,254 
Purchase premiums, net443 517 
Other94 69 
Gross deferred tax liabilities10,939 13,912 
Deferred tax assets, net (1)$24,735 $24,463 
(1)Included in accrued income and other assets on the Consolidated Statements of Financial Position.
We assess whether a valuation allowance should be established against our deferred tax assets based on the consideration of all available evidence using a ‘‘more likely than not’’ standard. The ultimate realization of this asset is primarily based on generating future income. We concluded at both December 31, 2025 and 2024, that the realization of substantially all of our deferred tax assets continues to be more likely than not.
Changes in unrecognized tax benefits for the years ended December 31 follow:
202520242023
(In thousands)
Balance at beginning of year$188 $188 $186 
Additions based on tax positions related to the current year26 18 13 
Reductions due to the statute of limitations(20)(18)(11)
Reductions due to settlements— — — 
Balance at end of year$194 $188 $188 
If recognized, the entire amount of unrecognized tax benefits, net of $0.04 million of federal tax on state benefits, would affect our effective tax rate. No amounts were expensed for interest and penalties for the years ended December 31,
2025, 2024 and 2023. No amounts were accrued for interest and penalties at December 31, 2025, 2024 and 2023. At December 31, 2025, U.S. Federal tax years 2022 through the present remain open to examination.