Oak Valley Bancorp Income Taxes Disclosure

NOTE 9 — INCOME TAXES

 

The provision for income taxes consists of the following:

 

(in thousands)		YEARS ENDED DECEMBER 31,
		2025				2024
Current
Federal		$	3,958			$	4,443
State			2,967				3,148
			6,925				7,591
Deferred
Federal			(19	)			(152	)
State			(169	)			(195	)
			(188	)			(347	)
		$	6,737			$	7,244

 

The components of the Company’s deferred tax assets and liabilities (included in accrued interest and other assets on the consolidated balance sheets), is shown below:

 

(in thousands)		DECEMBER 31,
		2025				2024
Deferred tax assets:
Allowance for credit losses		$	3,659			$	3,388
Restricted stock expense			153				169
Accrued vacation			174				134
Accrued salary continuation liability			1,905				1,855
Deferred compensation			74				78
Core deposit intangible			102				99
Merger costs			39				47
Reserve for undisbursed commitments			202				102
Operating lease liability			2,253				2,073
State income tax			607				638
Unrealized loss on equity securities			192				231
Accumulated depreciation			(31	)			156
Unrealized loss on securities available for sale			7,839				9,949
		$	17,168			$	18,919
Deferred tax liabilities:
Prepaid expenses			(108	)			(134	)
FHLB dividends			(144	)			(144	)
Operating lease right-of-use asset			(2,140	)			(1,970	)
Deferred loan costs			(316	)			(334	)
Goodwill amortization			(653	)			(588	)
Limited partner investment in small business equity fund			(228	)			(248	)
		$	(3,589	)		$	(3,418	)
Net deferred income tax asset		$	13,579			$	15,501

 

Management has assessed the realizability of deferred tax assets and believes it is more likely than not that all deferred tax assets will be realized in the normal course of operations. Accordingly, these assets have not been reduced by a valuation allowance.

 

The Company periodically reviews its income tax positions based on tax laws and regulations and financial reporting considerations, and records adjustments as appropriate. This review takes into consideration the status of current taxing authorities’ examinations of the Company’s tax returns, recent positions taken by the taxing authorities on similar transactions.

 

The Company had no liabilities for unrecognized tax benefits as of December 31, 2025 and 2024.

 

The income tax provision effective tax rate for 2025 and 2024 differs from the current Federal statutory income tax as follows:

 

		YEAR ENDED DECEMBER 31,
		2025								2024
		Tax Provision				Effective Rate				Tax Provision				Effective Rate
Federal statutory income tax rate		$	6,436				21.0	%		$	6,760				21.0	%
California state taxes, net of federal tax benefit			2,625				8.6	%			2,757				8.6	%
Nontaxable or nondeductible items:
Tax exempt interest on municipal securities and loans			(1,584	)			(5.2	%)			(1,612	)			(5.0	%)
Other			(395	)			(1.3	%)			(204	)			(0.7	%)
Low-income housing tax credits			(345	)			(1.1	%)			(457	)			(1.4	%)
		$	6,737				22.0	%)		$	7,244				22.5	%

 

Oak Valley Bancorp files a consolidated return in the U.S. Federal tax jurisdiction and a combined report in the State of California tax jurisdiction.  None of the entities are subject to examination by taxing authorities for years before 2022 for U.S. federal or for years before 2021 for California. Total income taxes paid during the year ended December 31, 2025 totaled $2,275,000 and $2,805,000 for U.S. Federal tax and California state tax, respectively, as compared to $3,100,000 and $3,285,000 for the year ended December 31, 2024.