INCOME TAXES

12 Months Ended

Dec. 31, 2025

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

For the years ended December 31, 2025 and 2024, income tax expense attributable to income from operations consisted of the following (in thousands):

	2025		2024
Current expense:
Federal	$	6,875	$	4,877
State	630		416
Total current	7,505		5,293
Deferred expense/(benefit):
Federal	(2,938)		1,029
State	(556)		92
Establishment of valuation allowance	821		—
Total deferred	(2,673)		1,121
Income tax expense	$	4,832	$	6,414

The Corporation had no income taxes in foreign jurisdictions for the years ended December 31, 2025 and 2024.

Income tax expense differed from the amounts computed by applying the U.S. Federal statutory income tax rate to income before income tax expense as follows (in thousands, except percentages):

	2025
	Amounts		Percentages
Income taxes at the U.S. federal statutory tax rate	$	4,187	21.0	%
State and local income taxes, net of federal income tax impact (a)	134		0.7	%
Changes in valuation allowances	745		3.7	%
Nontaxable or nondeductible items
Municipal interest income	(360)		(1.8)	%
Other	91		0.5	%
Other adjustments	35		0.1	%
Total	$	4,832	24.2	%

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

Income tax expense differed from the amounts computed by applying the U.S. Federal statutory income tax rate to income before income tax expense as follows (in thousands) in accordance with the guidance prior to the adoption of ASU 2023-09:

	2024
Statutory federal tax rate	21		%
Tax computed at statutory rate	$	6,318
Increase (reduction) resulting from:
Tax-exempt income	(528)
Dividend exclusion	(10)
State taxes, net of Federal impact	437
Nondeductible interest expense	51
Other items, net	146
Income tax expense	$	6,414
Effective tax rate	21.3		%

For the year ended December 31, 2025, the Corporation made the following income tax payments, net of refunds received:

	2025
U.S. federal taxes	$	5,950
State and local taxes
New York	398
Total income taxes paid	$	6,348

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2025 and 2024, are presented below (in thousands):

Deferred tax assets:	2025		2024
Allowance for credit losses	$	6,534	$	5,858
Depreciation	1,334		1,122
Deferred compensation and directors' fees	1,656		1,444
Operating lease liabilities	1,253		1,435
Purchase accounting adjustment – fixed assets	154		154
Net unrealized losses on securities available for sale	12,484		22,487
Defined benefit pension and other benefit plans	448		527
Nonaccrued interest	381		381
Accrued expense	52		74
Capital loss carryforward	2,694		—
Other items, net	114		135
Total gross deferred tax assets	27,104		33,617
Deferred tax liabilities:
Deferred loan fees and costs	1,054		1,220
Prepaid pension	4,268		4,283
Discount accretion	195		163
Core deposit intangible	1,847		1,821
REIT dividend	1,107		775
Operating lease right-of-use assets	1,253		1,435
Accrual for employee benefit plans	15		11
Other items, net	285		241
Total gross deferred tax liabilities	10,024		9,949
Valuation allowance	821		—
Net deferred tax asset	$	16,259	$	23,668

Realization of deferred tax assets is dependent upon the generation of future taxable income. A valuation allowance is recognized when it is more likely than not that some portion of the deferred tax assets will not be realized. In assessing the need for a valuation allowance, management considers the scheduled reversal of the deferred tax assets, the level of historical taxable income and projected future taxable income over the periods in which the temporary differences comprising the deferred tax assets will be deductible. 

The sale of available for sale securities during the second quarter of 2025 resulted in a net loss of $17.5 million and occurred at the Bank, as well as the Corporation's REIT Entity. Under IRC Sec. 582(c)(1), in the case of banks, the sale or exchange of a bond, debenture, note or certificate or other evidence of indebtedness shall not be considered a sale or exchange of a capital asset. Therefore, the loss from the sale of securities at the Bank is considered ordinary in nature. However, the REIT is not considered a "bank" under IRC Sec. 582(c) and therefore, a sale of securities at the REIT are considered capital in nature. The capital loss amount of $11.5 million (gross) attributable to the REIT and represented a $2.7 million deferred tax asset subject to

a 5-year carryforward limitation. Based on its assessment during the fourth quarter of 2025, management determined to establish a valuation allowance against its deferred tax asset associated with the capital loss in the amount of $821 thousand.

The Corporation’s current tax planning strategies include the planned sale of appreciated investment securities and loans from the REIT entity. These transactions are intended to generate future capital gains sufficient to utilize the capital loss carryforward prior to its expiration. Management has demonstrated both the ability and intent to execute these strategies in a timely and economically feasible manner.

After detailed review, including various scenarios of changes in market interest rates, while the Corporation’s management has demonstrated the ability and intent to implement these prudent and reasonable actions, management determined that it is more likely than not that a portion of the deferred assets, including the capital loss carryforward, will not be realized. Further, management will continue to monitor all available positive and negative evidence on at least a quarterly basis, consistent with ASC 740, and will promptly adjust the valuation allowance assessment if facts and circumstances change materially.

As of December 31, 2025 and 2024, the Corporation did not have any unrecognized tax benefits.

The Corporation accounts for interest and penalties related to uncertain tax positions as part of its provision for Federal and State income taxes. As of December 31, 2025 and 2024, the Corporation did not accrue any interest or penalties related to its uncertain tax positions.

The Corporation is not currently subject to examinations by Federal taxing authorities for the years prior to 2022 and for New York State taxing authorities for the year prior to 2022. New York State taxing authorities recently completed audits of the Corporation for the years 2018, 2019, and 2020. There were no adjustments as a result of the New York State audits.