Income Taxes
–The consolidated provision (credit) for income taxes consists of the following at December 31, 2025, 2024 and 2023:
| | | | | | | | | | | | | | | | | |
| (Dollars in thousands) | 2025 | | 2024 | | 2023 |
| | | | | |
| Provision for Current Taxes - Federal | $ | 21,249 | | | $ | 18,906 | | | $ | 17,491 | |
| Provision (Credit) for Deferred Taxes | 1,199 | | | (962) | | | 2,052 | |
| Total Provision for Income Taxes | $ | 22,448 | | | $ | 17,944 | | | $ | 19,543 | |
The provision (credit) for federal income taxes differs from the amount computed by applying federal statutory rates to income from operations as indicated in the following analysis at December 31, 2025, 2024 and 2023. The December 31, 2025 quantitative threshold was 5% totaling $1.2 million.
| | | | | | | | | | | | | | | |
| (Dollars in thousands) | 2025 | | | | |
| Amount | | Percent | | | | |
| | | | | | | |
| US Federal Statutory Tax | $ | 23,165 | | | 21.0 | % | | | | |
| Nontaxable or Nondeductible Items | | | | | | | |
| Tax Exempt Interest | (1,544) | | | (1.4) | | | | | |
| Other | 91 | | | 0.1 | | | | | |
| | | | | | | |
| State and Local Income Taxes, Net of Federal Benefit | 608 | | | 0.6 | | | | | |
| Other (Less Than the 5% Threshold) | 128 | | | 0.1 | | | | | |
| Total Provision for Income Taxes | $ | 22,448 | | | 20.4 | % | | | | |
| | | | | | | | | | | |
| (Dollars in thousands) | 2024 | | 2023 |
| | | |
| Federal Statutory Income Tax | $ | 17,441 | | | $ | 19,023 | |
| Tax Exempt Income | (513) | | | (188) | |
| Stock Based Compensation | (9) | | | 197 | |
| Goodwill Write-off for Branch Sale | - | | | 32 | |
| State Taxes | 928 | | | 695 | |
| Other - Net | 97 | | | (216) | |
| Total Provision for Income Taxes | $ | 17,944 | | | $ | 19,543 | |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
The components of the deferred tax assets and liabilities are as follows:
| | | | | | | | | | | |
| (Dollars in thousands) | 2025 | | 2024 |
| | | |
| State NOL | $ | 2,368 | | | $ | 2,634 | |
| State NOL Valuation Allowance | (2,368) | | | (2,634) | |
| Net Operating Loss Carryforward | — | | | 681 | |
| Unrealized Loss on Securities | 8,917 | | | 16,876 | |
| Acquired Loans Fair Market Value Adjustment | 1,582 | | | 2,561 | |
| Allowance for Loan Losses | 11,401 | | | 11,587 | |
| Lease Liability | 5,649 | | | 8,139 | |
| Deferred Compensation | 3,597 | | | 3,227 | |
| Stock Awards | 1,212 | | | 1,012 | |
| Reserve for Unfunded Commitments | 883 | | | 779 | |
| Credit Card Rewards | 151 | | | 509 | |
| Other | 371 | | | 1,146 | |
| Deferred Tax Assets | 33,763 | | | 46,517 | |
| | | |
| Right of Use Asset | 5,480 | | | 7,976 | |
| Core Deposit Intangible | 3,063 | | | 3,645 | |
| Depreciation | 3,110 | | | 3,727 | |
| Acquired Securities Difference in Basis | 740 | | | 868 | |
| Other | 893 | | | 710 | |
| Deferred Tax Liabilities | 13,286 | | | 16,926 | |
| Net Deferred Tax Asset | $ | 20,477 | | | $ | 29,591 | |
The Company acquired certain deferred tax attributes and liabilities as a result of the TCBI acquisition in 2022 and Oakwood acquisition in 2024, including a federal net operating loss (“NOL”) carryforward of $8.8 million and $4.2 million, respectively, and a federal charitable contribution carryforward of $229,000 and $99,000. The amount of the NOL carryforward the Company is allowed to deduct against current taxable income each year is limited, and the Company may not offset more than 80% of taxable income in any year. During the 2025 tax year, the Company was able to fully utilize the $3.2 million in NOL carryforward as well as the $99,000 of charitable contribution carryforward from the year ended December 31, 2024. As of December 31, 2025, the Company did not have a NOL carryforward.
The following is a summary of federal and state income taxes paid (net of refunds received):
| | | | | | | | | |
| (Dollars in thousands) | 2025 | | | | |
| | | | | |
| Federal | $ | 22,950 | | | | | |
| State | 1,122 | | | | | |
| Total Taxes Paid (Net of Refunds Received) | $ | 24,072 | | | | | |
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.