LAKELAND FINANCIAL CORPLKFN
LAKELAND FINANCIAL CORP Income Taxes Disclosure
INCOME TAXES
Pretax income is entirely related to domestic activities. The Company did not have any foreign operations or foreign tax expense for the periods presented below. Income tax expense for the years ended December 31, 2025, 2024 and 2023 consisted of the following:
| (dollars in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current federal | $ | 18,583 | $ | 21,949 | $ | 16,171 | |||||||||||
| Deferred federal | 3,650 | (2,829) | 1,302 | ||||||||||||||
| Current state | (285) | 63 | (131) | ||||||||||||||
| Deferred state | 274 | (972) | (776) | ||||||||||||||
| Total income tax expense | $ | 22,222 | $ | 18,211 | $ | 16,566 | |||||||||||
For the year ended December 31, 2025, the Company adopted ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" on a prospective basis. The differences between financial statement tax expense and amounts computed by applying the statutory federal income tax rate of 21% to income before income taxes were as follows:
| (dollars in thousands) | 2025 | ||||||||||
| Federal statutory rate | $ | 26,372 | 21.0 | % | |||||||
| Effect of: | |||||||||||
| State and local income taxes, net of federal benefits | (9) | 0.0 | |||||||||
| Tax credits, net of amortization and losses | (164) | (0.1) | |||||||||
| Nontaxable or nondeductible items: | |||||||||||
| Tax exempt income | (3,501) | (2.8) | |||||||||
| Bank owned life insurance | (921) | (0.7) | |||||||||
| Long-term incentive plan and deferred compensation | 10 | 0.0 | |||||||||
| Nondeductible compensation expense | 190 | 0.1 | |||||||||
| Other nondeductible expenses | 288 | 0.2 | |||||||||
| Other | (43) | 0.0 | |||||||||
| Total income tax expense | $ | 22,222 | 17.7 | % | |||||||
For 2024 and 2023 the differences between financial statement tax expense and amounts computed by applying the statutory federal income tax rate of 21% to income before income taxes were as follows:
| (dollars in thousands) | 2024 | 2023 | |||||||||
| Income taxes at statutory federal rate of 21% | $ | 23,455 | $ | 23,170 | |||||||
| Increase (decrease) in taxes resulting from: | |||||||||||
| Tax exempt income | (3,712) | (4,226) | |||||||||
| Nondeductible expenses | 280 | 269 | |||||||||
| State income tax, net of federal tax effect | (718) | (716) | |||||||||
| Captive insurance premium income | 0 | (261) | |||||||||
| Tax credits, net of amortization and losses | (150) | (713) | |||||||||
| Bank owned life insurance | (903) | (658) | |||||||||
| Long-term incentive plan and deferred compensation | (270) | (715) | |||||||||
| Nondeductible compensation expense | 405 | 784 | |||||||||
| Other | (176) | (368) | |||||||||
| Total income tax expense | $ | 18,211 | $ | 16,566 | |||||||
During the year ended December 31, 2025, the Company paid federal income taxes of $16.4 million and received a refund from the State of Indiana for $30,000.
NOTE 12 – INCOME TAXES (continued)
The net deferred tax asset recorded in the consolidated balance sheets at December 31, 2025 and December 31, 2024 consisted of the following:
| (dollars in thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Bad debts | $ | 17,574 | $ | 21,909 | |||||||
| Pension and deferred compensation liability | 2,430 | 2,166 | |||||||||
| Nonaccrual loan interest | 1,403 | 955 | |||||||||
| Long-term incentive plan | 2,685 | 1,755 | |||||||||
| Lease liability | 2,370 | 1,727 | |||||||||
| Deferred loan fees | 540 | 574 | |||||||||
| Accrued legal reserve | 0 | 0 | |||||||||
| Net operating loss carryforward | 1,900 | 1,343 | |||||||||
| Other | 733 | 724 | |||||||||
| 29,635 | 31,153 | ||||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation | 5,333 | 3,324 | |||||||||
| Loan servicing rights | 433 | 502 | |||||||||
| State taxes | 1,096 | 1,153 | |||||||||
| Intangible assets | 1,266 | 1,267 | |||||||||
| REIT spillover dividend | 1,750 | 2,040 | |||||||||
| Prepaid expenses | 1,155 | 900 | |||||||||
| Lease right of use | 2,370 | 1,727 | |||||||||
| Other | 247 | 331 | |||||||||
| 13,650 | 11,244 | ||||||||||
| Valuation allowance | 0 | 0 | |||||||||
| Net deferred tax asset | $ | 15,985 | $ | 19,909 | |||||||
At December 31, 2025, the Company has Indiana net operating loss carryforwards of approximately $38.8 million that will expire in 2039 if not used. Management has concluded that the state net operating losses will be fully utilized and therefore no valuation allowance is necessary on the state net operating loss.
In addition to the net deferred tax assets included above, the deferred income tax asset (liability) allocated to the unrealized net gain (loss) on securities available-for-sale included in equity was $33.7 million and $44.1 million for 2025 and 2024, respectively. The deferred income tax asset allocated to the pension plan and SERP included in equity was $175,000 and $188,000 for 2025 and 2024, respectively.
The Company evaluated its deferred tax asset at year end 2025 and has concluded that it is more likely than not that it will be realized. The Company expects to have taxable income in the future such that the deferred tax asset will be realized. Therefore, no valuation allowance is required.
Unrecognized Tax Benefits
The Company did not have any unrecognized tax benefits at December 31, 2025 or 2024.
No interest or penalties were recorded in the income statement and no amount was accrued for interest and penalties for the periods ending December 31, 2025, 2024 and 2023. Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is the Company’s policy to record such accruals in its income taxes accounts.
The Company and its subsidiaries file a consolidated U.S. federal tax return and a combined unitary return in the State of Indiana. These returns are subject to examinations by authorities for all years after 2021.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 19, 2025 | |
| 2023 | Feb 21, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2020 | Feb 23, 2021 | |
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.