v3.26.1
Income Taxes
 3 Months Ended
Mar. 31, 2026
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of the income tax provision are detailed as follows for the dates indicated (dollars in thousands):

Three Months Ended March 31,
20262025
Current income tax expense
Federal$6,080 $5,134 
State906 765 
Total current income tax expense6,986 5,899 
Deferred tax expense
Federal251 (480)
State37 (71)
Total deferred income tax expense288 (551)
Total income tax expense$7,274 $5,348 
A reconciliation of taxes on income from the statutory income tax rate to income tax expense is as follows for the periods indicated (dollars in thousands):
Three Months Ended March 31,
20262025
AmountPercentAmountPercent
Income tax expense, computed at federal statutory rate of pretax income$6,180 21.00 %$4,745 21.00 %
State and local income taxes910 3.09 %584 2.58 %
Effect of nontaxable income and nondeductible expenses184 0.63 %18 0.08 %
Other — — %1 0.02 %
Total income tax expense$7,274 24.72 %$5,348 23.68 %

Income taxes paid were as follows for the periods indicated (dollars in thousands):
Three Months Ended March 31,
20262025
AmountAmount
Federal$— $— 
State and local
Virginia90 — 
Pennsylvania40 11 
Ohio38 34 
Massachusetts32 16 
California28 — 
New York23 7 
Minnesota16 6 
Connecticut— 19 
All other states23 — 
Total income taxes paid$290 $93 
Deferred tax assets and liabilities consisted of the following as of period end (dollars in thousands):
March 31, 2026December 31, 2025
Allowance for credit losses$2,340 $2,518 
Accrued expenses and other reserve accounts1,868 1,802 
Nonaccrual loan interest910 846 
Stock compensation829 509 
Other real estate owned valuation73 31 
Unrealized loss on debt securities available for sale10 45 
Other deferred tax assets70 76 
Total deferred tax assets 6,100 5,827 
Mortgage servicing rights 4,885 4,030 
Fixed assets 3,216 3,273 
Goodwill and intangibles442 472 
Deferred loan costs/fees1,596 1,732 
Other deferred tax liabilities71 106 
Total deferred tax liabilities10,210 9,613 
Net deferred tax liability$(4,110)$(3,786)

The Company and its subsidiaries file consolidated tax returns. The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized. Deferred tax assets are included in other assets in the consolidated balance sheets and deferred tax liabilities are included in other liabilities in the consolidated balance sheets.
Uncertain tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than- not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. There were no uncertain tax positions recognized at March 31, 2026 and December 31, 2025.
With a few exceptions, the Company is no longer subject to U.S. federal tax examinations by tax authorities for years before 2023, and state and local income tax examinations by tax authorities for years before 2023. For federal tax purposes, the Company recognizes interest and penalties on income taxes as a component of income tax expense.
On July 4, 2025, the President signed H.R. 1, the “One Big Beautiful Bill Act,” into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. These changes did not have a material impact on the Company’s federal income tax expense or liability for the year ended December 31, 2025 or for the three months ended March 31, 2026. The Company does not expect these changes to have a material impact on future periods.