v3.26.1
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 9. INCOME TAXES

 

Allocation of the federal and state income tax provision (benefit) between current and deferred portions is as follows:

 

 

December 31,

 

(In thousands)

 

2025

 

 

2024

 

Current tax provision:

 

 

 

 

 

 

  Federal

 

$

418

 

 

$

3,348

 

  State

 

 

(51

)

 

 

1,114

 

    Total current provision

 

 

367

 

 

 

4,462

 

Deferred tax (benefit) provision

 

 

 

 

 

 

  Federal

 

 

(1,664

)

 

 

(678

)

  State

 

 

(1,097

)

 

 

135

 

    Total deferred benefit

 

 

(2,761

)

 

 

(543

)

   Total tax (benefit) expense

 

$

(2,394

)

 

$

3,919

 

 

Pretax income from continuing operations is entirely derived from domestic sources.

 

A reconciliation of the tax (benefit) expense at the statutory federal income tax rate to the actual income tax (benefit) expense is as follows:

 

 

 

December 31,

 

(In thousands)

 

2025

 

 

2024

 

Tax at the statutory income tax rate of 21%

 

$

(1,193

)

 

21.0

%

 

$

3,235

 

 

21.0

%

(Decrease) increase resulting from:

 

 

 

 

 

 

 

 

 

 

State taxes, net of federal tax benefit (1)

 

 

(907

)

 

16.0

%

 

 

987

 

 

6.4

%

Tax exempt income

 

 

(121

)

 

2.1

%

 

 

(106

)

 

(0.7

)%

Dividends received deduction

 

 

—

 

 

—

%

 

 

(18

)

 

(0.1

)%

Bank-owned life insurance

 

 

(238

)

 

4.2

%

 

 

(195

)

 

(1.3

)%

Tax credits (net of ammortization)

 

 

(16

)

 

0.3

%

 

 

(65

)

 

(0.4

)%

Valuation allowance

 

 

100

 

 

(1.8

)%

 

 

—

 

 

—

%

Other, net

 

 

(19

)

 

0.3

%

 

 

81

 

 

0.5

%

Income tax (benefit) expense

 

$

(2,394

)

 

42.1

%

 

$

3,919

 

 

25.4

%

(1) State taxes in Massachusetts made up the majority (greater than 50 percent) of the tax effect in this category.

Income taxes paid were as follows:

 

December 31,

 

(In thousands)

2025

 

 

2024

 

Federal

$

2,044

 

 

77.7

%

 

$

3,080

 

 

80.2

%

Massachusetts

 

573

 

 

21.8

%

 

 

730

 

 

19.0

%

Other States

 

14

 

 

0.5

%

 

 

31

 

 

0.8

%

Net payment

$

2,631

 

 

 

 

$

3,841

 

 

 

 

The net deferred tax asset related to federal and state are as follows:

 

 

December

 

(In thousands)

 

2025

 

 

2024

 

Deferred tax assets:

 

 

 

 

 

 

Federal

 

$

11,628

 

 

$

12,357

 

State

 

 

4,152

 

 

 

3,532

 

 

 

15,780

 

 

 

15,889

 

Deferred tax liabilities:

 

 

 

 

 

 

Federal

 

 

(2,099

)

 

 

(2,202

)

State

 

 

(547

)

 

 

(892

)

 

 

(2,646

)

 

 

(3,094

)

Net deferred tax asset

 

$

13,134

 

 

$

12,795

 

The components of the net deferred tax asset are as follows:

 

 

 

December 31,

 

(In thousands)

 

2025

 

 

2024

 

Allowance for credit losses

 

$

6,384

 

 

$

6,392

 

Employee benefit plans

 

 

2,506

 

 

 

2,126

 

Accrued expenses

 

 

402

 

 

 

701

 

Net unrealized loss on available for sale securities

 

 

3,565

 

 

 

6,147

 

SBA PPP fees

 

 

—

 

 

 

2

 

Partnership investments

 

 

66

 

 

 

56

 

Operating leases

 

 

24

 

 

 

13

 

Research and expenditures

 

 

—

 

 

 

420

 

Swap

 

 

110

 

 

 

—

 

Charitable contributions

 

 

2,791

 

 

 

—

 

Impairment loss on securities

 

 

52

 

 

 

52

 

Deferred tax assets, before valuation allowance

 

 

15,900

 

 

 

15,909

 

Valuation allowance

 

 

(120

)

 

 

(20

)

Deferred tax assets, net of valuation allowance

 

 

15,780

 

 

 

15,889

 

Deferred loan costs, net

 

 

(843

)

 

 

(906

)

Mortgage servicing rights

 

 

(918

)

 

 

(1,076

)

Depreciation and amortization

 

 

(514

)

 

 

(692

)

Swap

 

 

—

 

 

 

(49

)

Other

 

 

(371

)

 

 

(371

)

Deferred tax liabilities

 

 

(2,646

)

 

 

(3,094

)

Net deferred tax asset

 

$

13,134

 

 

$

12,795

 

A valuation allowance is provided when it is more likely than not that some portion of the gross deferred tax asset will not be realized. At December 31, 2025 a valuation allowance was recorded related to the federal and state deferred tax asset on the Company's contribution to the Foundation and unrealized capital losses in the form of other than temporarily impaired write-downs of securities. At December 31, 2024, a valuation allowance was recorded related to the federal and state deferred tax asset on unrealized capital losses in the form of other than temporarily impaired write-downs of securities. Management believes that the remaining net deductible temporary differences which give rise to the net deferred tax asset will reverse during periods in which the Company generates net taxable income. In addition, gross deductible temporary differences are expected to reverse in periods during which offsetting gross taxable temporary differences are expected to reverse. Factors beyond management’s control, such as the general state of the economy and real estate values, can affect future levels of taxable income, and no assurance can be given that sufficient taxable income will be generated to fully absorb gross deductible temporary differences.

For the years ended December 31, 2025 and 2024, the Company recognized $248 thousand and $246 thousand, respectively, in tax benefits related to affordable housing tax credits.

At December 31, 2025, the Company’s retained earnings includes approximately $3.5 million of allowance for credit

losses, representing the base year amount, for which income taxes have not been provided. If any portion of the reserve is used for purposes other than to absorb loan losses, approximately 150% of the amount actually used, limited to the amount of the reserve, would be subjected to taxation in the fiscal year in which used. As the Company intends to use the reserve solely to absorb loan losses, a deferred tax liability of approximately $992 thousand has not been provided.

The Company’s income tax returns are subject to review and examination by federal and state taxing authorities. The Company is currently open to audit under applicable statutes of limitations by the Internal Revenue Service and the Massachusetts Department of Revenue Administration for the years ended December 31, 2023 through 2025.