FIRST COMMUNITY BANKSHARES INC /VA/ Income Taxes Disclosure

Note 14. Income Taxes 

 

Income tax expense is comprised of current and deferred, federal and state income taxes on the Company’s pre-tax earnings. The following table presents the components of the income tax provision from continuing operations for the periods indicated:

 

		Year Ended December 31,
(Amounts in thousands)		2025				2024				2023
Current tax expense:
Federal		$	12,189			$	11,070			$	11,055
State			1,141				1,173				1,553
Total current tax expense			13,330				12,243				12,608
Deferred tax expense:
Federal			509				1,624				1,166
State			492				223				180
Total deferred tax expense			1,001				1,847				1,346
Total income tax expense		$	14,331			$	14,090			$	13,954

 

 

The Company’s effective tax rate, income tax as a percent of pre-tax income, may vary significantly from the statutory rate due to permanent differences and available tax credits. Permanent differences are income and expense items excluded by law in the calculation of taxable income. The Company’s most significant permanent differences generally include interest income on municipal securities and increases in the cash surrender value of life insurance policies. The following table reconciles the Company’s income tax expense to the amount computed by applying the federal statutory tax rate to pre-tax income for the periods indicated.  The Company adopted ASU 2023-09 - Improvements to Income Tax Disclosures on January 1, 2025.  The amendments were applied prospectively.  Accordingly, the income tax rate reconciliation for the year ended Decembers 31, 2025 is presented using the new disclosure requirements.  Prior-period amounts continue to be presented in accordance with the previous guidance.

 

		Year Ended December 31,
		2025
		Amount				Percent
(Amounts in thousands)
Federal income tax at the statutory rate		$	13,256				21.00	%
State income tax, net of federal benefit (1)			1,217				1.93	%
			14,473				22.93	%
Nontaxable and nondeductible items:
Tax-exempt interest income			(357	)			(0.57	)%
Excess tax benefits			(14	)			(0.02	)%
Bank owned life insurance			(253	)			(0.40	)%
Other			115				0.18	%
Tax Credits			(65	)			(0.10	)%
Other			432				0.68	%
Income tax at the effective tax rate		$	14,331				22.70	%

 

(1)	State taxes in West Virginia made up the majority (greater than 50 percent) of the tax effect in this category.

 

 

The following table presents income tax expense differences from the federal statutory rate applied to income before income taxes, for the tax years of 2024 and 2023, before the adoption of ASU 2023-09.

 

		Year Ended December 31,
		2024								2023
		Amount				Percent				Amount				Percent
(Amounts in thousands)
Federal income tax at the statutory rate		$	13,796				21.00	%		$	13,014				21.00	%
State income tax, net of federal benefit			1,102				1.68	%			1,368				2.21	%
			14,898				22.68	%			14,382				23.21	%
Nontaxable and nondeductible items:
Tax-exempt interest income			(351	)			(0.54	)%			(348	)			(0.56	)%
Excess tax benefits			(104	)			(0.16	)%			(25	)			(0.04	)%
Bank owned life insurance			(227	)			(0.35	)%			(167	)			(0.27	)%
Other items, net			(126	)			(0.19	)%			112				0.17	%
Income tax at the effective tax rate		$	14,090				21.44	%		$	13,954				22.51	%

 

 

The following table presents income taxes paid (net of refunds received) for the year ended  December 31, 2025.

 

(Amounts in thousands)		2025
US Federal		$	9,200
US State and Local:
Other			650
Foreign			-
Total Income Tax Paid		$	9,850

 

 

On July 4, 2025, the One Big Beautiful Bill Act was enacted into law by the federal government.  In accordance with ASC 740, Income taxes, we recognized the total effect of the tax law changes.  The tax provision of the One Big Beautiful Act did not have a material impact on our income tax balances.   

 

Deferred taxes derived from continuing operations reflect the net effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for tax purposes. The following table presents the significant components of the net deferred tax asset as of the dates indicated:

 

		December 31,
(Amounts in thousands)		2025				2024
Deferred tax assets
Allowance for credit losses		$	7,173			$	8,193
Unrealized losses on available-for-sale securities			2,112				3,116
Deferred loan fees			3,345				3,978
Deferred compensation assets			8,074				6,918
Other			2,021				2,066
Total deferred tax assets			22,725				24,271
Deferred tax liabilities
Fixed assets			(1,545	)			(1,332	)
Intangible assets			(5,047	)			(4,671	)
Odd days interest deferral			(3,618	)			(3,874	)
Other			(1,437	)			(1,343	)
Total deferred tax liabilities			(11,647	)			(11,220	)
Net deferred tax asset		$	11,078			$	13,051

 

The Company had no unrecognized tax benefits or accrued interest or penalties as of December 31, 2025 or 2024. The Company had no deferred tax valuation allowance recorded as of December 31, 2025 or 2024, as management believes it is more likely than not that all of the deferred tax assets will be realized against deferred tax liabilities and projected future taxable income. The Company and its subsidiaries are subject to U.S. federal income tax of the various states.  The Company is no longer subject to examination by federal or state taxing authorities for years before 2022.

 

At  December 31, 2025, the Company had no federal or state net operating loss carryforwards. 

 

The Company has analyzed the tax positions taken, or expected to be taken in its tax returns, and concluded it has no liability related to uncertain tax positions.