CASS INFORMATION SYSTEMS INCCASS
CASS INFORMATION SYSTEMS INC Income Taxes Disclosure
Income Taxes
The components of income tax expense (benefit) are as follows:
For the Years Ended December 31, | |||||||||||||||||
| (In thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 140 | $ | 5,162 | $ | 5,964 | |||||||||||
| State | 240 | 612 | 1,087 | ||||||||||||||
| Foreign | 71 | 160 | (193) | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 6,244 | (891) | (242) | ||||||||||||||
| State | 952 | (156) | (42) | ||||||||||||||
| Total income tax expense | $ | 7,647 | $ | 4,887 | $ | 6,574 | |||||||||||
Income tax expense (benefit) broken out between Federal, state and foreign is as follows:
For the Years Ended December 31, | |||||||||||||||||
| (In thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Federal | $ | 6,384 | $ | 4,271 | $ | 5,722 | |||||||||||
| State | 1,192 | 456 | 1,045 | ||||||||||||||
| Foreign | 71 | 160 | (193) | ||||||||||||||
| Total income tax expense | $ | 7,647 | $ | 4,887 | $ | 6,574 | |||||||||||
The Company adopted ASU 2023-09 on a prospective basis on January 1, 2025. The following table presents required disclosure pursuant to ASU 2023-09 and reconciles the expected income tax expense (benefit) and effective tax rate, computed by applying the effective statutory rate of 21% for the year ended December 31, 2025 as follows:
For the Year Ended December 31, 2025 | |||||||||||
| (In thousands) | Amount | Percent | |||||||||
| U.S federal statutory tax rate | $ | 8,112 | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect (1) | 942 | 2.4 | % | ||||||||
| Foreign tax effects | 71 | 0.2 | % | ||||||||
| Tax credits | (431) | (1.1) | % | ||||||||
| Nontaxable or nondeductible items: | |||||||||||
| Tax-exempt income | (1,246) | (3.3) | % | ||||||||
| Share-based compensation adjustment | 160 | 0.4 | % | ||||||||
| Other, net | 39 | 0.1 | % | ||||||||
| Total income tax expense | $ | 7,647 | 19.7 | % | |||||||
| (1) | State taxes in Missouri and California made up the majority (greater than 50%) of the tax effect in this category. | ||||
The following table presents the required disclosures prior to the Company's adoption of ASU 2023-09 and reconciles the expected income tax expense (benefit), computed by applying the effective federal statutory rate of 21% for each year to income before income tax expense is as follows:
| For the Years Ended | |||||||||||
| (In thousands) | 2024 | 2023 | |||||||||
| Expected income tax expense | $ | 4,898 | $ | 7,278 | |||||||
| (Reductions) increases resulting from: | |||||||||||
| Tax-exempt income | (1,045) | (1,104) | |||||||||
| State taxes, net of federal benefit | 355 | 801 | |||||||||
| Share-based compensation adjustment | 316 | 298 | |||||||||
| Early surrender of bank-owned life insurance | 279 | — | |||||||||
| Federal tax credits | (397) | (643) | |||||||||
| Other, net | 481 | (56) | |||||||||
| Total income tax expense | $ | 4,887 | $ | 6,574 | |||||||
Income tax expense in 2025 totaled $7.6 million compared to $4.9 million in 2024 and $6.6 million in 2023. When measured as a percent of pre-tax income, the Company’s effective tax rate was 19.7% in 2025, 20.8% in 2024, and 19.1% in 2023.
The tax effects of temporary differences which give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:
| December 31, | |||||||||||
| (In thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Allowance for credit losses | $ | 3,236 | $ | 3,188 | |||||||
| Supplemental executive retirement plan accrual | 2,286 | 2,345 | |||||||||
| Stock compensation | 2,819 | 2,623 | |||||||||
Unrealized loss on investment securities available-for-sale (1) | 8,266 | 14,205 | |||||||||
| Research and development expenses | — | 760 | |||||||||
| Lease liability | 1,073 | 1,774 | |||||||||
| Other | 497 | 718 | |||||||||
| Total deferred tax assets | $ | 18,177 | $ | 25,613 | |||||||
| Deferred tax liabilities: | |||||||||||
| Premises and equipment | $ | (988) | $ | (986) | |||||||
| ASC 715 supplemental executive retirement plan asset | (249) | (249) | |||||||||
| Research and development expenses | (4,711) | — | |||||||||
| Intangible assets | (968) | (1,900) | |||||||||
| Right of use asset | (1,038) | (1,677) | |||||||||
| Prepaid expenses | (991) | (936) | |||||||||
| Other | (541) | (391) | |||||||||
| Total deferred tax liabilities | $ | (9,486) | $ | (6,139) | |||||||
| Net deferred tax assets | $ | 8,691 | $ | 19,474 | |||||||
(1)The deferred tax asset associated with the unrealized losses on investment securities is mainly a result of changes in interest rates, and the unrealized losses are considered to be temporary as the fair value is expected to recover as the investment securities approach their respective maturity dates. The issuers of the investment securities are of high credit quality and all principal amounts are expected to be paid when the investment securities mature. The Company does not intend to sell and it is more likely than not that the Company will not be required to sell the securities prior to their anticipated recovery.
A valuation allowance would be provided on deferred tax assets when it is more likely than not that some portion of the assets will not be realized. The Company has not established a valuation allowance at December 31, 2025 or 2024, due to management’s belief that it is more likely than not that the deferred tax asset is realizable.
The reconciliation of the beginning unrecognized tax benefits balance to the ending balance is presented in the following table:
| (In thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Balance at January 1 | $ | 1,257 | $ | 1,397 | $ | 1,252 | |||||||||||
| Changes in unrecognized tax benefits as a result of tax positions taken during a prior year | (52) | (151) | 99 | ||||||||||||||
| Changes in unrecognized tax benefits as a result of tax position taken during the current year | 181 | 262 | 300 | ||||||||||||||
| Reductions to unrecognized tax benefits as a result of a lapse of the applicable statute of limitations | (195) | (251) | (254) | ||||||||||||||
Balance at December 31 | $ | 1,191 | $ | 1,257 | $ | 1,397 | |||||||||||
At December 31, 2025, 2024 and 2023, the balances of the Company’s unrecognized tax benefits which would, if recognized, affect the Company’s effective tax rate were $1.2 million, $1.1 million and $1.3 million, respectively. These amounts are net of the offsetting expense from other taxing jurisdictions.
As of December 31, 2025, 2024 and 2023, the Company had $183,000, $70,000 and $117,000, respectively, in accrued interest related to unrecognized tax benefits.
The Company is subject to income tax in the U.S. federal jurisdiction, numerous state jurisdictions, and a foreign jurisdiction. The Company’s federal income tax returns for tax years 2022, 2023 and 2024 remain subject to examination by the Internal Revenue Service. In addition, the Company is subject to state tax examinations for the tax years 2021 through 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 6, 2026 | Showing above |
| 2024 | Mar 5, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Mar 8, 2017 | |
| 2015 | Mar 7, 2016 | |
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.