v3.26.1
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Taxes [Abstract]  
Income Taxes
Note 14 – Income Taxes
 
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.

The Company adopted the disclosure requirements in ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, on a retrospective basis as of January 1, 2025.  The adoption primarily impacted the presentation and disaggregation of the Company’s income tax disclosures and did not affect the Company’s consolidated financial condition, results of operations, or cash flows.
 
The components of income tax expense (benefit) from continuing operations consisted of the following:
 
   
2025
    
2024
  
   
(In thousands)
  
Current
            
Federal
  
$
118
    
$
505
  
State
     270      
504
  
    Foreign
     –       –  
Deferred
                
Federal
    
(245
)
    
12
  
State
    
195
      
(206
)
    Foreign
     –       –  
Total
  
$
338
    
$
815
  
 

Income taxes paid, net of refunds received was as follows:


   
2025
      
2024
  
 

(In thousands)
  
                 
Federal
  
$
–
    
$
150
  
California
    
215
      
200
  
Washington, D.C.
    
110
      
66
  
  Total
  
$
325
    
$
416
  

Effective tax rates differ from the federal statutory rate of 21% applied to income before income taxes due to the following:
 
   
2025
    
2024
  
   
(In thousands)
     (In thousands)  
U. S. Federal statutory income tax
  
$
(5,139
)
     21.00 %  
$
581
       21.00 %
State and local taxes, net of federal benefit*
     367       (1.50 )%     211       7.62 %
Nontaxable or nondeductible items
                                
Earnings from bank owned life insurance
    
(72
)
     0.29 %    
(10
)
     (0.36 )%
Tax-exempt interest, net of TEFRA disallowance
    
(7
)
     0.03 %    
(5
)
     (0.18 )%
Goodwill impairment
     5,430
       (22.19 )%     –       0.00 %
Stock-based compensation
     7       (0.03 )%     38       1.37 %
Other, net
    
(248
)
     1.02 %    
–
       0.00 %
Effective tax rate
  
$
338
       (1.38 )%  
$
815
       29.43 %

*
State and local taxes in California and Washington, D.C. made up the majority (greater than 50 percent) of the tax effect in this category.

Year‑end deferred tax assets and liabilities were due to the following:
 
   
2025
    
2024
  
   
(In thousands)
  
Deferred tax assets:
            
Allowance for credit losses
  
$
2,658
    
$
2,408
  
Accrued liabilities
    
851
      
483
  
State income taxes
    
56
      
108
  
Stock compensation
    
239
      
196
  
Tax loss carryforwards
    
1,900
      
1,880
  
Partnership investment
    
252
      
292
  
General business credit
    
1,007
      
1,544
  
Net unrealized loss on securities available-for-sale
     2,403       4,864  
Lease liability
     424       127  
Fair value adjustment on acquired loans
     27       100  
Other
    
316
      
166
  
Total deferred tax assets
    
10,133
      
12,168
  
Less: valuation allowance
     (449 )     (449 )
Total deferred tax assets, net of valuation allowance
     9,684       11,719  
Deferred tax liabilities:
                
Deferred loan fees/costs
    
(1,152
)
    
(1,273
)
Basis difference on fixed assets
    
(726
)
    
(708
)
FHLB stock dividends
    
(1
)
    
(54
)
Prepaid expenses
    
(261
)
    
(172
)
Right of use assets
     (421 )     (121 )
Core deposit intangibles
     (412 )     (511 )
Total deferred tax liabilities
    
(2,973
)
    
(2,839
)
Net deferred tax assets
  
$
6,711
    
$
8,880
  

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, 2025, a valuation allowance of $449 thousand was required on the Company’s net deferred tax assets, which totaled $6.7 million (net of valuation allowance). As of December 31, 2024, a valuation allowance of $449 thousand was required on the Company’s net deferred tax assets, which totaled $8.9 million (net of valuation allowance).

As of December 31, 2025, 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 $1.0 million, which will begin to expire in 2033 if not utilized.
  
The Company did not have any unrecognized tax benefits as of December 31, 2025 or 2024.
 
Federal tax years 2022 through 2025 remain open for the assessment of Federal income tax. California tax years 2021 through 2025 remain open for the assessment of California franchise tax. Washington, D.C. tax years 2022 through 2025 remain open for the assessment of D.C. franchise tax. The Company is not currently under examination by any tax authorities.