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INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The following presents the components of the Company’s income tax expense:
December 31,
(dollars in thousands)
20252024
Current:
Federal$4,334 $247 
State and local322 (264)
Total current tax expense (benefit)4,656 (17)
Deferred:
Federal(883)2,766 
State and local113 357 
Total deferred tax (benefit) expense(770)3,123 
Income tax expense$3,886 $3,106 
Income before income taxes is entirely related to domestic activities as the Company does not have any foreign operations.
The following is a reconciliation of income taxes reflected on the Consolidated Statements of Income for the years ended December 31, 2025 and 2024, with income tax expense computed by applying the United States federal income tax rate of 21% to income before income taxes:
December 31,
(dollars in thousands)
20252024
AmountPercentAmountPercent
Federal statutory income tax$3,586 21.00 %$2,432 21.00 %
Effect of:
State and local income taxes, net of federal benefit(1)
452 2.65 279 2.41 
State low-income housing tax credits (LIHTC)(132)(0.77)(167)(1.44)
Tax credits
Federal LIHTC(2)
(277)(1.62)176 1.52 
Solar investment tax credits(135)(0.79)— — 
Nontaxable or nondeductible items
Section 162(m) limitation228 1.34 118 1.02 
Other(90)(0.53)(96)(0.83)
Other adjustments
Other(117)(0.68)9 0.08 
Income tax receivable true-up281 1.65 99 0.85 
Deferred tax asset true-up90 0.51 256 2.21 
Income tax expense$3,886 22.76 %$3,106 26.82 %
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(1)State taxes in Colorado made up the majority (greater than 50 percent) of the tax effect in this category.
(2)For the year ended December 31, 2025, the federal LIHTC amount reflects income tax benefits of $0.7 million from tax credits and $0.2 million from allocated K-1 losses, partially offset by $0.6 million of amortization. For the year ended December 31, 2024, the federal LIHTC amount reflects $0.8 million of amortization, partially offset by income tax benefits of $0.5 million from tax credits and $0.1 million from allocated K-1 losses.
Income tax paid, net of refunds, were as follows:
December 31,
(dollars in thousands)
20252024
Federal(1)
$1,165 $215 
State and local
Arizona(2)
30 (47)
Total$1,195 $168 
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(1)During the year ended December 31, 2025, the Company paid $1.2 million for the purchase of solar investment tax credits.
(2)During the years ended December 31, 2025 and 2024, the Company paid $30 thousand and $75 thousand for the purchase of Arizona state tax credits.
The following presents the principal components of the Company’s deferred tax items:
December 31,
(dollars in thousands)
20252024
Deferred tax assets:
Net operating loss carryforwards$472 $472 
State deferred tax credits66 — 
Allowance for credit losses5,059 4,327 
Acquired loans fair market value adjustments851 955 
Loan accounted for under the fair value option128 174 
Lease liability5,430 4,948 
Stock-based compensation610 840 
Provision on other real estate owned458 261 
Other intangible assets56 81 
Unrealized losses on securities404 250 
Interest on non-accrual loans applied to principal299 293 
Unfunded commitment liability165 159 
Other114 106 
Total deferred tax assets14,112 12,866 
Deferred tax liabilities:
Goodwill(1,505)(1,384)
Depreciation(2,370)(2,787)
Right-of-use asset(4,832)(4,523)
Assets acquired at fair value(426)(476)
Loan costs(88)(71)
Losses from partnerships(304)— 
FHLB redemption(133)(98)
Other(3)— 
Total deferred tax liabilities(9,661)(9,339)
Valuation allowance(448)(448)
Net deferred tax asset$4,003 $3,079 
Management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the total deferred tax assets. The net operating loss (NOL) carryforwards expire in tax years 2028 through 2032. As of December 31, 2025 and December 31, 2024, the Company had $5.5 million of California NOLs available for utilization. As of December 31, 2025, $5.2 million is recorded as a valuation allowance, resulting in a tax effected valuation allowance of $0.4 million. The Company identified no other material uncertain tax positions for which it is reasonably possible the total amount of unrecognized tax benefits will significantly increase or decrease within 12 months.
The Company and its subsidiaries file tax returns for the United States and for multiple states and localities. The United States federal income tax returns of the Company are eligible to be examined for the years 2022 and forward and for the years 2021 and forward for major state taxing jurisdictions. There are no federal or state tax examinations currently in progress.