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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Taxes [Abstract]  
Income Taxes
Note 14 – Income Taxes
 
The Company and its subsidiary are subject to U.S. federal and state income taxes. Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. 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 effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
 
Income tax expense (benefit) was as follows:
 
   
2024
    
2023
  
   
(In thousands)
  
Current
            
Federal
  
$
505
    
$
300
  
State
     504      
398
  
Deferred
                
Federal
    
11
      
1,046
  
State
    
(206
)
    
241
  
Total
  
$
814
    
$
1,985
  
 
Effective tax rates differ from the federal statutory rate of 21% applied to income before income taxes due to the following:
 
   
2024
    
2023
  
   
(In thousands)
  
Federal statutory rate times pre-tax net income
  
$
581
    
$
1,370
  
Effect of:
                
State taxes, net of federal benefit
    
211
      
512
  
Earnings from bank owned life insurance
    
(10
)
    
(9
)
Low-income housing credits
    
–
      
–
  
Change in valuation allowance
     –
       80  
Tax effect of stock-based compensation
     38       14  
Other, net
    
(6
)
    
18
  
Total
  
$
814
    
$
1,985
  

Year‑end deferred tax assets and liabilities were due to the following:
 
   
2024
    
2023
  
   
(In thousands)
  
Deferred tax assets:
            
Allowance for credit losses
  
$
2,331
    
$
2,008
  
Accrued liabilities
    
483
      
580
  
State income taxes
    
108
      
30
  
Stock compensation
    
196
      
196
  
Net operating loss carryforward
    
1,880
      
1,982
  
Partnership investment
    
292
      
340
  
General business credit
    
1,544
      
1,962
  
Alternative minimum tax credit
    
–
      
11
  
Net unrealized loss on securities available-for-sale
     4,864       5,815  
Right of use liability
     127       196  
Fair value adjustment on acquired loans
     100       223  
Other
    
166
      
212
  
Total deferred tax assets
    
12,091
      
13,555
  
Less: valuation allowance
     (449 )     (449 )
Total deferred tax assets, net of valuation allowance
     11,642       13,106  
Deferred tax liabilities:
                
Section 481 adjustments to bad debts
    
–
      
–
Deferred loan fees/costs
    
(1,273
)
    
(1,743
)
Basis difference on fixed assets
    
(708
)
    
(748
)
FHLB stock dividends
    
(54
)
    
(98
)
Nonaccrual loan interest
    
–
      
–
Prepaid expenses
    
(172
)
    
(180
)
Right of use assets
     (121 )     (189 )
Core deposit intangibles
     (511 )     (610 )
Total deferred tax liabilities
    
(2,839
)
    
(3,568
)
Net deferred tax assets
  
$
8,803
    
$
9,538
  

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management evaluated both positive and negative evidence, the amount of taxes paid in available carry‑back years, and the forecasts of future income and tax planning strategies. Based on this analysis, management determined that, as of December 31, 2024, a valuation allowance of $449 thousand was required on the Company’s deferred tax assets, which totaled $8.8 million (net of valuation allowance). As of December 31, 2023, a valuation allowance of $449 thousand was required on the Company’s deferred tax assets, which totaled $9.5 million (net of valuation allowance).

As of December 31, 2024, the Company had California net operating loss carryforwards of $22.0 million which will begin to expire in 2032 if not utilized. The Company also had federal general business credits of $1.5 million, which will begin to expire in 2033 if not utilized.
  
The Company did not have any unrecognized tax benefits as of December 31, 2024 or 2023.
 
2023 is the most recent tax year for which the Company has filed federal and state income or franchise tax returns. Federal tax years 2021 through 2023 remain open for the assessment of Federal income tax. California tax years 2020 through 2023 remain open for the assessment of California franchise tax. Washington, D.C. tax years 2021 through 2023 remain open for the assessment of D.C. franchise tax. The Company is not currently under examination by any tax authorities.