Orange County Bancorp, Inc. /DE/ Income Taxes Disclosure
Note 11 — Income Taxes
The components of earnings before the provision for income taxes, by taxing jurisdiction, are as follows:
| Year ended December 31, | ||
2025 | |||
Domestic | $ | 51,556 | |
Foreign |
| — | |
Total | $ | 51,556 | |
The components of the provision (benefit) for income taxes are as follows:
| Year ended December 31, | |||||
2025 | 2024 | |||||
Current taxes | ||||||
Federal | $ | 10,047 |
| $ | 7,679 | |
State |
| 286 |
| 232 | ||
Foreign | — | — | ||||
Total current taxes |
| 10,333 |
| 7,911 | ||
Deferred taxes | ||||||
Federal |
| (529) |
| (768) | ||
State (1) |
| 138 |
| (208) | ||
Foreign | — | — | ||||
Total deferred taxes |
| (391) |
| (976) | ||
Total tax provision (benefit) | $ | 9,942 |
| $ | 6,935 | |
| (1) | The components of the state deferred income tax provision (benefit) for the tax year ended December 31, 2024, are presented net of the valuation allowance in accordance with ASU 2023‑09. |
The Company has elected to prospectively adopt the guidance in ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Taxes Disclosures, or ASU 2023-09. The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company's effective rate for the year ended December 31, 2025 in accordance with the guidance in ASU No. 2023-09:
| Year ended December 31, | |||||
2025 | ||||||
Amount | Percent | |||||
Income before provision for income taxes | $ | 51,556 | ||||
Income tax expense (benefit) at U.S. federal statutory rate | 10,827 | 21.00% | ||||
State and local income taxes (net of federal income tax effect)(a) |
| 279 |
| 0.54% | ||
Nontaxable or Nondeductible items | ||||||
Earnings on CSV |
| (938) |
| (1.82)% | ||
Other items | (288) | (0.56)% | ||||
Other Reconciling items |
| 62 |
| 0.12% | ||
$ | 9,942 | $ | 19.28% | |||
| (a) | State taxes in NY & NJ Jurisdictions made up the majority of the tax effect in this category in 2025. |
The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company's effective rate for the years ended December 31, 2024 in accordance with the guidance prior to the adoption of ASU 2023-09:
| Year ended December 31, | |||||
2024 | ||||||
Amount | Percent | |||||
Income tax expense (benefit) at the federal statutory rate | $ | 7,528 | 21.00% | |||
State income tax provision, net of federal income tax effect |
| 1,455 |
| 4.06% | ||
Net earnings on bank-owned life insurance |
| (170) |
| (0.47)% | ||
Tax-exempt municipal bond income, net of disallowed interest expense |
| (469) |
| (1.31)% | ||
Valuation allowance |
| (1,818) |
| (5.07)% | ||
Other |
| 409 |
| 1.14% | ||
$ | 6,935 | $ | 19.35% | |||
The tax effects of temporary differences that give rise to significant components of the deferred tax assets (liabilities) are provided below:
| 2025 | | 2024 | |||
Deferred tax assets: |
| | ||||
Allowance for credit losses | $ | 7,647 |
| $ | 6,899 | |
Reserve for unfunded commitments |
| 115 |
| 138 | ||
Deferred loan fees, net of costs |
| 1,111 |
| 1,090 | ||
Deferred compensation |
| 3,465 |
| 3,277 | ||
Available for sale securities | 14,220 | 20,053 | ||||
Non-accrual interest |
| 177 |
| 212 | ||
State NOL |
| 232 |
| 1,348 | ||
Lease liability | 1,173 | 892 | ||||
Pension/deferred compensation OCI | 2,169 | 2,698 | ||||
Accrued Liabilities | 270 | — | ||||
Capital Loss Carryforward |
| 29 |
| — | ||
Subtotal |
| 30,608 |
| 36,607 | ||
Less: valuation allowance | (5,657) | (6,938) | ||||
24,951 | 29,669 | |||||
Deferred tax liabilities: |
| |
| | ||
Intangible assets |
| (1,261) |
| (1,142) | ||
Organization costs – holding company |
| (35) |
| (35) | ||
Organization costs – OIA |
| (34) |
| (31) | ||
Pension |
| (3,365) |
| (3,182) | ||
Accumulated depreciation |
| (670) |
| (632) | ||
Accretion |
| (116) |
| (90) | ||
Right of use | (1,173) | (892) | ||||
Total deferred income tax liabilities |
| (6,654) |
| (6,004) | ||
Net deferred income taxes | $ | 18,297 | $ | 23,665 | ||
The amount of cash paid for income taxes (net of refunds received) was as follows:
| Year ended December 31, | ||
2025 | |||
Federal | $ | 9,900 | |
State |
| 232 | |
Income taxes paid (net of refunds received) | $ | 10,132 | |
The Company has recorded a federal deferred tax asset that based upon an analysis of the evidence, it expects such federal deferred tax asset to be recoverable. The federal deferred tax asset is included in other assets on the balance sheet. However, due to the change in New York State tax legislation passed in March 2014, management has determined that a full valuation allowance, totaling $5,657 and $6,938 against the New York State portion of the deferred tax asset, which includes state net operating losses, at December 31, 2025 and 2024, respectively, is appropriate. At December 31, 2024, the Company has net operating loss carryforwards available for income tax purposes of approximately $3.1 million, with expiration dates through 2041.
The Company did not have any uncertain tax positions at December 31, 2025 and 2024. The Company’s policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Consolidated Statements of Income.
The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of the states of New York and New Jersey. The Company is no longer subject to examination by taxing authorities for years before 2021.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 16, 2026 | Showing above |
| 2024 | Mar 17, 2025 | |
| 2023 | Mar 29, 2024 | |
| 2022 | Mar 24, 2023 | |
| 2021 | Mar 30, 2022 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.