Income Taxes

12 Months Ended

Dec. 31, 2025

Income Taxes

Income Taxes

8.   Income Taxes

The components of the provision for income taxes are as follows:

	Years Ended December 31,
	2025		2024
Current expense:
Federal	$	433	$	(1)
State		365		265
Total current expense		798		264
Deferred expense:
Federal		1,842		(2,581)
State		527		(738)
Change in valuation allowance		(527)		738
Total deferred expense		1,842		(2,581)
Total provision for income taxes	$	2,640	$	(2,317)

The following is a reconciliation between the expected federal statutory income tax rate of 21% and the Company’s actual income tax expense and rate:

	Years ended December 31,
	2025				2024
Provision (benefit) at U.S. federal statutory tax rate	$	2,664	21.00	%	$	(2,297)	21.00	%
State and local income taxes, net of federal income tax effect(1)		799	6.30	%		(523)	4.78	%
Changes in valuation allowances		(527)	(4.15)	%		737	(6.74)	%
Nontaxable or nondeductible Items
Tax exempt income		(165)	(1.30)	%		(248)	2.27	%
Equity based		(163)	(1.28)	%		—	0.00	%
Other		32	0.25	%		12	(0.11)	%
Effective income tax and rate	$	2,640	20.81	%	$	(2,317)	21.18	%

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

Provision for income taxes directly reflects the expected tax associated with the pre-tax income generated for the given year and certain regulatory requirements.  The statutory tax rate is impacted by the benefits derived mainly from tax-exempt bond income and income received on the bank owned life insurance to arrive at the effective tax rate.

The following table presents cash paid for federal and state income taxes for the years ended December 31, 2025 and 2024.

	Years Ended December 31,
	2025		2024
Cash paid for federal income taxes	$	257	$	599
Cash paid for New York State income taxes		346		275
Total cash paid for income taxes	$	603	$	874

The tax effects of temporary differences that give rise to significant components of the deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024 are presented below:

	December 31,
	2025		2024
Deferred tax assets:
Allowance for credit losses	$	2,296	$	2,371
Deferred expenses		27		21
Deferred compensation		1,860		1,773
Unrecognized pension liability		446		653
Postretirement liability		1,057		1,032
Deferred loan fees		5		—
Unrealized loss on securities		1,663		2,786
Federal tax net operating loss carryforward		354		2,538
Other		670		889
Gross deferred tax assets		8,378		12,063
Deferred tax liabilities:
Prepaid expenses		(623)		(578)
Prepaid pension		(1,165)		(1,180)
Deferred loan fees		—		(51)
Depreciation and amortization		(482)		(374)
Mortgage servicing rights		(341)		(430)
Other		(17)		—
Gross deferred tax liabilities		(2,628)		(2,613)
Net deferred tax asset		5,750		9,450
Deferred tax valuation allowance		(809)		(1,336)
Deferred tax assets, net of allowance	$	4,941	$	8,114

As of December 31, 2025, the Company has a federal net operating loss (“NOL”) carryforward of $1,311, which carries forward indefinitely under current tax regulations. This NOL resulted in a deferred tax asset of $354, representing a temporary difference in the Company’s financial statements. The realization of this deferred tax asset depends on the Company’s ability to generate sufficient future taxable income.

New York State (“NYS”) tax law provides for a permanent deduction of income from “qualified” loans for community banks. Accordingly, the Company has generally incurred NYS taxable losses and incurred minimal NYS income tax liability. As the Company has not established a history of strong NYS taxable income, the Company has established a full valuation allowance against the NYS deferred tax asset. Based on management’s assessment of projected earnings and other relevant factors, the Company has recorded a deferred tax valuation allowance of $809 as of December 31, 2025, compared to $1,336 of December 31, 2024. The decrease in the valuation allowance reflects management’s evaluation of the likelihood of utilizing certain deferred tax assets in future periods.

Retained earnings at December 31, 2025 and 2024 include a contingency reserve for loan losses of $1,534, which represents the tax reserve balance existing at December 31, 1987 and is maintained in accordance with provisions of the Internal Revenue Code applicable to mutual savings banks. Amounts transferred to the reserve have been claimed as deductions from taxable income and, if the reserve is used for purposes other than to absorb losses on loans, a federal income tax liability could be incurred. It is not anticipated that the Company will incur a federal income tax liability relating to this reserve balance and accordingly, deferred income taxes of $414 at December 31, 2025 and December 31, 2024 have not been recognized.

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 the applicable statutes of limitations by the Internal Revenue Service for the years ended December 31, 2022 through 2025. The years open to examination by state taxing authorities vary by jurisdiction; no years prior to 2022 are open.

As of December 31, 2025, the Company has no unrecognized tax benefits.