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Note 15 - Income Taxes | 12 Months Ended
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Dec. 31, 2025
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
15. | INCOME TAXES
The provision for income taxes for the years ended December 31, 2025, 2024 and 2023 consisted of the following:
2025 |  | Federal |  |  | State |  |  | Total |
Current |  | $ | 4,558,000 |  |  | $ | 3,148,000 |  |  | $ | 7,706,000 |
Deferred |  |  | 1,713,000 |  |  |  | 556,000 |  |  |  | 2,269,000 |
Provision for income taxes |  | $ | 6,271,000 |  |  | $ | 3,704,000 |  |  | $ | 9,975,000 |
2024 |  | Federal |  |  | State |  |  | Total |
Current |  | $ | 6,896,000 |  |  | $ | 3,540,000 |  |  | $ | 10,436,000 |
Deferred |  |  | 75,000 |  |  |  | (129,000 | ) |  |  | (54,000 | )
Provision for income taxes |  | $ | 6,971,000 |  |  | $ | 3,411,000 |  |  | $ | 10,382,000 |
2023 |  | Federal |  |  | State |  |  | Total |
Current |  | $ | 7,310,000 |  |  | $ | 3,827,000 |  |  | $ | 11,137,000 |
Deferred |  |  | (582,000 | ) |  |  | (120,000 | ) |  |  | (702,000 | )
Provision for income taxes |  | $ | 6,728,000 |  |  | $ | 3,707,000 |  |  | $ | 10,435,000 |
Deferred tax assets (liabilities) consisted of the following:
|  | December 31, |
|  | 2025 |  |  | 2024 |
Deferred tax assets: |  |  |  |  |  |  |  |
Allowance for credit losses |  | $ | 9,989,000 |  |  | $ | 3,714,000 |
Deferred compensation |  |  | 2,315,000 |  |  |  | 1,166,000 |
State taxes |  |  | 618,000 |  |  |  | 734,000 |
Premises and equipment |  |  | 554,000 |  |  |  | 190,000 |
Unrealized loss on available-for-sale investment securities |  |  | 4,315,000 |  |  |  | 10,552,000 |
Lease liability |  |  | 8,410,000 |  |  |  | 6,968,000 |
Acquired Net operating loss |  |  | 750,000 |  |  |  | - |
Other |  |  | 995,000 |  |  |  | 1,144,000 |
Total deferred tax assets |  |  | 27,946,000 |  |  |  | 24,468,000 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Deferred loan costs |  |  | (1,627,000 | ) |  |  | (1,397,000 | )
Purchase accounting adjustments |  |  | (3,105,000 | ) |  |  | (249,000 | )
Right-of-use assets |  |  | (8,361,000 | ) |  |  | (6,849,000 | )
Other |  |  | (360,000 | ) |  |  | (241,000 | )
Total deferred tax liabilities |  |  | (13,453,000 | ) |  |  | (8,736,000 | )
Net deferred tax assets |  | $ | 14,493,000 |  |  | $ | 15,732,000 |
Deferred tax assets and liabilities are recognized for the tax consequences of temporary differences between the reported amount of assets and liabilities and their tax bases. 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 determination of the amount of deferred income tax assets which are more likely than not to be realized is primarily dependent on projections of future earnings, which are subject to uncertainty and estimates that may change given economic conditions and other factors. The realization of deferred income tax assets is assessed and a valuation allowance is recorded if it is "more likely than not" that all or a portion of the deferred tax asset will not be realized. "More likely than not" is defined as greater than a 50% chance. All available evidence, both positive and negative, is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed. At December 31, 2025 total deferred tax assets were approximately $27,946,000 and total deferred tax liabilities were approximately $13,453,000 for a net deferred tax asset of $14,493,000. The Company’s deferred tax assets primarily relate to timing differences in the tax deductibility of unrealized losses on investment securities, depreciation on premises and equipment, the provision for credit losses and deferred compensation. Based upon our analysis of available evidence, management of the Company determined that it is "more likely than not" that all of our deferred income tax assets as of December 31, 2025 and 2024 will be fully realized and therefore no valuation allowance was recorded. On the consolidated balance sheet, net deferred tax assets are included in accrued interest receivable and other assets. Federal and State net operating loss carryforwards (NOLs) as of the Financial Statement Date totaled $2,762,000 and $1,987,000, respectively. The realization of these NOLs is dependent upon the Company’s ability to generate future taxable income during the carryforward periods. The Company has evaluated the available evidence, both positive and negative, and has concluded that it is more likely than not that the NOLs will be fully realized, therefore no valuation allowance was recorded. The Company recognized, as components of tax expense, tax credits and other tax benefits and amortization expense relating to our investment in Qualified Affordable House Projects as follows:
|  | December 31, 2025 |  | December 31, 2024 |  |  | December 31, 2023 |
Tax credits and other tax benefits - decrease in tax expense | $ | 382,359 |  | $ | 305,928 |  | $ | 142,691 |
Amortization - increase in tax expense | $ | 334,198 |  | $ | 237,753 |  | $ | 93,012 |
The carrying value of Low-Income Housing Tax Credit Funds was $6,790,000 and $2,150,000 as of December 31, 2025 and 2024, respectively. As of December 31, 2025, the Company has committed to make additional capital contributions to the Low-Income Housing Tax Credit Funds in the amount of $4,249,000, and these contributions are expected to be made over the next several years. During the year ended December 31 2025, the Company purchased $10 million of transferable green‑energy tax credits from unrelated third‑party project developers under the transferability provisions of the Inflation Reduction Act of 2022. The purchased credits relate primarily to a solar project placed in service during 2025. The Company elected to apply the guidance in ASC 740, Income Taxes, and therefore recognizes purchased tax credits as a reduction of income tax expense when (i) the Company obtains control of the credits, and (ii) realization is considered more likely than not. The credits were acquired at a 7% discount from face value. As of December 31, 2025, the Company recognized:
| ● | $700 thousand of income tax benefit from the utilization of purchased credits
| ● | $10 million of remaining purchased credits, recorded within Accrued interest receivable and other assets
| ● | $9.3 million of cash paid for credits, reflected within Operating activities in the Consolidated Statements of Cash Flows
No impairment or valuation allowance is considered necessary for the purchased credits. The provision for income taxes differs from amounts computed by applying the statutory Federal income tax rate to operating income before income taxes. The significant items comprising these differences consisted of the following:
|  | Year Ending December 31 |
|  | 2025 |  |  | 2024 |  |  | 2023 |
|  | Amount |  |  | Percent |  |  | Amount |  |  | Percent |  |  | Amount |  |  | Percent |
US Federal Statutory Tax Rate |  | $ | 8,314,422 |  |  |  | 21.00 | % |  | $ | 8,190,210 |  |  |  | 21.00 | % |  | $ | 8,444,310 |  |  |  | 21.00 | %
State and Local Income Taxes, Net of Federal Income Tax Effect |  |  | 2,971,573 |  |  |  | 7.51 | % |  |  | 2,730,070 |  |  |  | 7.00 | % |  |  | 2,814,770 |  |  |  | 7.00 | %
Enactment of new tax laws |  |  | (6,629 | ) |  |  | (0.02 | %) |  |  | - |  |  |  | 0.00 | % |  |  | - |  |  |  | 0.00 | %
Tax Credits |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Affordable housing tax credit and benefits |  |  | (382,359 | ) |  |  | (0.97 | %) |  |  | (305,928 | ) |  |  | (0.80 | %) |  |  | (142,691 | ) |  |  | (0.40 | %)
Affordable housing amortization |  |  | 334,198 |  |  |  | 0.84 | % |  |  | 237,753 |  |  |  | 0.60 | % |  |  | 93,012 |  |  |  | 0.20 | %
Acquired Solar ITCs (Investment Tax Credits) |  |  | (700,000 | ) |  |  | (1.77 | %) |  |  | - |  |  |  | 0.00 | % |  |  | - |  |  |  | 0.00 | %
Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest on obligations of states and political subdivisions |  |  | (430,841 | ) |  |  | (1.09 | %) |  |  | (468,012 | ) |  |  | (1.22 | %) |  |  | (723,798 | ) |  |  | (1.75 | %)
Net increase in cash surrender value of bank owned life insurance |  |  | (155,223 | ) |  |  | (0.39 | %) |  |  | (78,002 | ) |  |  | (0.20 | %) |  |  | (80,422 | ) |  |  | (0.20 | %)
Other, net |  |  | 29,859 |  |  |  | 0.08 | % |  |  | 75,909 |  |  |  | 0.22 | % |  |  | 29,819 |  |  |  | 0.15 | %
Total |  | $ | 9,975,000 |  |  |  | 25.19 | % |  | $ | 10,382,000 |  |  |  | 26.60 | % |  | $ | 10,435,000 |  |  |  | 26.00 | %
The cash paid across jurisdictions for income taxes (net of refunds) during the year was as follows:
|  | Year Ending December 31 |
|  | 2025 |  |  | 2024 |  |  | 2023 |
Federal |  | $ | 5,750,000 |  |  | $ | 6,260,000 |  |  | $ | 8,100,000 |
State and Local |  |  |  |  |  |  |  |  |  |  |  |
California |  |  | 2,805,000 |  |  |  | 3,360,000 |  |  |  | 4,130,000 |
Other |  |  | 40,000 |  |  |  | 35,000 |  |  |  | 31,000 |
Subtotal State and Local |  |  | 2,845,000 |  |  |  | 3,395,000 |  |  |  | 4,161,000 |
Total |  | $ | 8,595,000 |  |  | $ | 9,655,000 |  |  | $ | 12,261,000 |
The Company and its subsidiary file income tax returns in the U.S. federal and applicable state jurisdictions. The Company conducts all of its business activities in the states of California, Nevada and Oregon. There are currently no pending U.S. federal, state, and local income tax or non-U.S. income tax examinations by tax authorities. With few exceptions, the Company is no longer subject to tax examinations by U.S. Federal taxing authorities for years ended before December 31, 2022, and by state and local taxing authorities for years ended before December 31, 2021. The unrecognized tax benefits and changes therein and the interest and penalties accrued by the Company as of or during the years ended December 31, 2025 and 2024 were not significant. The Company does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months.

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