FIRST MID BANCSHARES, INC. Income Taxes Disclosure
Note 15 -- Income Taxes
The components of federal and state income tax expense for the years ended December 31, 2025, 2024, and 2023 were as follows (in thousands):
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Current |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
19,899 |
|
|
$ |
18,504 |
|
|
$ |
2,189 |
|
State |
|
|
7,738 |
|
|
|
6,404 |
|
|
|
542 |
|
Total current |
|
|
27,637 |
|
|
|
24,908 |
|
|
|
2,731 |
|
Deferred |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
(1,887 |
) |
|
|
(2,497 |
) |
|
|
12,585 |
|
State |
|
|
(451 |
) |
|
|
3,087 |
|
|
|
4,154 |
|
Total deferred |
|
|
(2,338 |
) |
|
|
590 |
|
|
|
16,739 |
|
Total |
|
$ |
25,299 |
|
|
$ |
25,498 |
|
|
$ |
19,470 |
|
Recorded income tax expense differs from the expected tax expense (computed by applying the applicable statutory U.S. federal tax rate of 21% to income before income taxes). The principal reasons for the difference are as follows (in thousands):
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
||||||||||||
|
|
Amount |
|
Percentage |
|
|
Amount |
|
Percentage |
|
|
Amount |
|
Percentage |
|
||||||
US statutory income tax rate |
|
$ |
24,580 |
|
|
21.0 |
% |
|
$ |
21,923 |
|
|
21.0 |
% |
|
$ |
18,565 |
|
|
21.0 |
% |
Domestic state and local income tax, net of federal |
|
|
5,772 |
|
|
4.9 |
% |
|
|
4,917 |
|
|
4.7 |
% |
|
|
3,710 |
|
|
4.2 |
% |
Tax credits (federal) |
|
|
(290 |
) |
|
-0.2 |
% |
|
|
(229 |
) |
|
-0.2 |
% |
|
|
(303 |
) |
|
-0.3 |
% |
Nontaxable or nondeductible items (federal) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Tax-exempt income from bank owned life insurance |
|
|
(908 |
) |
|
-0.8 |
% |
|
|
(994 |
) |
|
-1.0 |
% |
|
|
(1,035 |
) |
|
-1.2 |
% |
Nondeductible interest expense |
|
|
98 |
|
|
0.1 |
% |
|
|
307 |
|
|
0.3 |
% |
|
|
799 |
|
|
0.9 |
% |
Other tax-exempt income |
|
|
(2,459 |
) |
|
-2.1 |
% |
|
|
(2,397 |
) |
|
-2.3 |
% |
|
|
(2,416 |
) |
|
-2.7 |
% |
Other |
|
|
93 |
|
|
0.1 |
% |
|
|
(297 |
) |
|
-0.3 |
% |
|
|
251 |
|
|
0.3 |
% |
Changes in valuation allowances (federal) |
|
|
(607 |
) |
|
-0.5 |
% |
|
|
(357 |
) |
|
-0.3 |
% |
|
|
— |
|
|
— |
% |
Changes in tax laws or rates enacted in the current period |
|
|
— |
|
|
— |
% |
|
|
2,581 |
|
|
2.5 |
% |
|
|
— |
|
|
— |
% |
Changes in unrecognized tax benefits (federal), net |
|
|
249 |
|
|
0.2 |
% |
|
|
213 |
|
|
0.2 |
% |
|
|
— |
|
|
— |
% |
Other items |
|
|
(1,229 |
) |
|
-1.0 |
% |
|
|
(169 |
) |
|
-0.2 |
% |
|
|
(101 |
) |
|
-0.1 |
% |
Effective tax rate |
|
$ |
25,299 |
|
|
21.6 |
% |
|
$ |
25,498 |
|
|
24.4 |
% |
|
$ |
19,470 |
|
|
22.0 |
% |
Tax expense recorded by the Company for the years ended December 31, 2025, 2024, and 2023 included interest or penalties of approximately $249,000, $213,000, and $307,000, respectively. Tax returns filed with the Internal Revenue Service, Illinois, Wisconsin, Florida, Indiana, Missouri, and Texas Department of Revenues are subject to review by law under a three-year statute of limitations. The Company is no longer subject to U.S. federal or state income tax examinations by tax authorities for years before 2022.
On July 4, 2025, The One Big Beautiful Bill Act, was signed into law. The Company has completed its evaluation of the provisions of the bill and does not expect it to have a material impact on its financial statements.
The tax effects of the temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024 are presented below (in thousands):
|
|
2025 |
|
|
2024 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Allowance for credit losses |
|
$ |
19,751 |
|
|
$ |
18,588 |
|
Available-for-sale investment securities |
|
|
36,171 |
|
|
|
49,082 |
|
Deferred compensation |
|
|
4,215 |
|
|
|
4,377 |
|
Supplemental retirement |
|
|
533 |
|
|
|
512 |
|
Deferred loan costs |
|
|
384 |
|
|
|
462 |
|
Stock compensation expense |
|
|
207 |
|
|
|
80 |
|
Deferred revenue |
|
|
162 |
|
|
|
211 |
|
Acquisition costs |
|
|
87 |
|
|
|
112 |
|
Lease liability |
|
|
3,476 |
|
|
|
3,743 |
|
Other |
|
|
3,083 |
|
|
|
3,623 |
|
Total gross deferred tax assets |
|
|
68,069 |
|
|
|
80,790 |
|
Less valuation allowance |
|
|
— |
|
|
|
(682 |
) |
Net deferred tax asset |
|
|
68,069 |
|
|
|
80,108 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
||
Intangibles amortization |
|
|
8,722 |
|
|
|
5,378 |
|
Prepaid expenses |
|
|
1,947 |
|
|
|
2,023 |
|
FHLB stock dividend |
|
|
21 |
|
|
|
21 |
|
Deferred expenses |
|
|
100 |
|
|
|
100 |
|
Purchase accounting |
|
|
— |
|
|
|
1,854 |
|
Depreciation |
|
|
3,177 |
|
|
|
4,517 |
|
Accumulated accretion |
|
|
— |
|
|
|
222 |
|
Mortgage servicing rights |
|
|
1,202 |
|
|
|
1,485 |
|
Right of use asset |
|
|
3,335 |
|
|
|
3,657 |
|
Other |
|
|
552 |
|
|
|
1,265 |
|
Total gross deferred tax liabilities |
|
|
19,056 |
|
|
|
20,522 |
|
Deferred tax assets, net |
|
$ |
49,013 |
|
|
$ |
59,586 |
|
In evaluating the realizability of its deferred tax assets, the Company assesses whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Based on historical taxable income and projected future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will generate sufficient taxable income to realize the deferred tax assets as of December 31, 2024 and 2025, except
for a valuation allowance of $682,000 recorded against the 2024 net deferred tax asset related to capital loss carryforwards. In determining the need for this valuation allowance, the Company considered all positive and negative evidence available in assessing whether the weight of such evidence supported recognition of the deferred tax assets related to these capital losses. The Company expects to generate sufficient capital gains in 2025 to utilize the capital loss carryforwards; therefore, the Company has concluded that a valuation allowance is no longer warranted for the related deferred tax asset.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Mar 6, 2024 | |
| 2022 | Mar 3, 2023 | |
| 2021 | Mar 2, 2022 | |
| 2020 | Mar 8, 2021 | |
| 2019 | Mar 9, 2020 | |
| 2018 | Mar 5, 2019 | |
| 2017 | Mar 2, 2018 | |
| 2016 | Mar 6, 2017 | |
| 2015 | Mar 4, 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.