Note 13. Income Taxes

The Company’s income before provision for income taxes was generated from its operations within the United States. The Company files income tax returns in the United States federal jurisdiction and in several states in which the Company originates loans. The Company identifies its federal tax return as its major tax jurisdiction. The periods subject to examination for the Company’s federal tax return are 2022, 2023 and 2024. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to applicable guidance.

From time to time, the Company may be assessed interest or penalties by tax jurisdictions, although the Company has had no such significant assessments historically. The Company’s policy is to include interest and penalties related to income taxes as a component of income tax expense. Interest and penalties included in income tax expense totaled $2 thousand and $19 thousand for the years ended December 31, 2025 and 2024, respectively.

Effective for the annual period ended December 31, 2025, the Company implemented ASU 2023-09, Income Taxes (Topic 740). This update expands disclosure requirements to provide increased transparency into the components of income tax expense that influence the reconciliation between the effective tax rate and the statutory rate, including related qualitative and quantitative details. The standard was adopted on a prospective basis beginning with the year ended December 31, 2025, and as a result, prior period disclosures were not adjusted.

Significant components of the Company’s deferred tax asset, included in other assets on the consolidated balance sheets, are shown in the following table:


(Dollars in thousands)	December 31, 2025			December 31, 2024
Deferred tax assets:
Allowance for credit losses	$	2,282		$	2,051
Depreciation		220			266
Deferred compensation		1,051			1,018
Unrealized losses on securities available for sale		5			390
Lease adjustments		106			74
Held for sale loans		234			328
Nonaccrual loan interest		207			120
Other		165			68
Total deferred tax assets		4,270			4,315

Deferred tax liabilities:
Capitalized loan costs		(2,927	)		(2,248	)
Stock compensation		(417	)		(351	)
Other		(357	)		(628	)
Total deferred tax liabilities		(3,701	)		(3,227	)
Net deferred tax asset	$	569			1,088

The Company has no deferred tax asset valuation allowances as of December 31, 2025 or 2024.

The following table presents income taxes paid (net of refunds received) during the year ended December 31, 2025 by jurisdiction:


(Dollars in thousands)	December 31, 2025
U.S. Federal	$	3,450
U.S. state and local
Illinois		91
North Carolina		91
South Carolina		92
Other (1)		422
Total income taxes paid	$	4,146

(1) Cash paid for income taxes (net of refunds) within this line item either do not exceed the 5% disaggregation threshold or are considered immaterial.

The following table presents the components of the provision for income taxes:


(Dollars in thousands)	December 31, 2025		December 31, 2024
Current tax provision (benefit):
Federal	$	4,482	$	4,853
State		1,155		843
Total current tax provision (benefit)		5,637		5,696

Deferred tax expense (benefit):
Federal		346		(368	)
State		36		(54	)
Total deferred tax expense (benefit)		382		(422	)
Total provision for income taxes	$	6,019		5,274

A reconciliation of the federal income tax provision at the statutory rate to GBank's actual federal income tax provision at its effective rate is as follows:


(Dollars in thousands)	December 31, 2025						December 31, 2024
	Amount			Percent			Amount			Percent
Provision at the expected statutory rate	$	5,689			21.0	%	$	5,021			21.0	%
State income taxes, net of federal tax benefit (1)		633			2.3	%		746			3.1	%
Effect of investment in life insurance		(161	)		-0.6	%		(97	)		-0.4	%
Effect of BCS transaction		-			0.0	%		53			0.2	%
Effect of stock-based compensation		(345	)		-1.3	%		(489	)		-2.0	%
Other items		203			0.7	%		40			0.2	%
Total provision for income taxes	$	6,019			22.2	%	$	5,274			22.1	%

(1) State taxes in California, Illinois, Indiana, Georgia, North Carolina, and Ohio made up the majority (approximately 79 percent) of the tax effect in this category during the year ended December 31, 2025.

For each of the years ended December 31, 2025 and 2024, the Company’s effective tax rate was 22% as compared to the statutory federal income tax rate of 21%. The effective rates for 2025 and 2024 differ from the expected statutory rate due to permanent differences and state taxes.

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.

GBank Financial Holdings Inc. Income Taxes Disclosure

About Income Taxes Disclosures

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