MetroCity Bankshares, Inc. Income Taxes Disclosure
NOTE 12 – INCOME TAXES
The components of income tax expense for the periods indicated were as follows:
Years Ended December 31, | |||||||||
(Dollars in thousands) | | 2025 | | 2024 | | 2023 | |||
Current tax provision: | |||||||||
Federal | $ | 18,548 | $ | 17,009 | $ | 13,522 | |||
State | 4,971 | 5,451 | 5,827 | ||||||
Total current tax provision | 23,519 | 22,460 | 19,349 | ||||||
Deferred tax provision: | |||||||||
Federal | 340 | 297 | 414 | ||||||
State | 303 | 53 | 596 | ||||||
Total deferred tax provision (benefit) | 643 | 350 | 1,010 | ||||||
Total provision for income taxes | $ | 24,162 | $ | 22,810 | $ | 20,359 | |||
The Company recorded no pretax income or provision for income taxes from foreign operations during the years ended December 31, 2025, 2024 and 2023.
The following table presents a reconciliation of the recorded provision for income taxes to the amount of taxes computed by applying the applicable statutory Federal income tax rate for the periods indicated:
Years Ended December 31, | ||||||||||||||||
2025 | 2024 | 2023 | ||||||||||||||
(Dollars in thousands) | | Amount | | % | | Amount | | % | Amount | | % | |||||
Federal statutory tax rate | $ | 19,466 | 21.0 | % | $ | 18,336 | 21.0 | % | $ | 15,102 | 21.0 | % | ||||
State income taxes, net of federal benefit(1) | 4,166 | 4.5 | 4,348 | 5.0 | 5,074 | 7.1 | ||||||||||
Nontaxable or nondeductible items | 491 | 0.5 | 14 | — | 153 | 0.2 | ||||||||||
Other adjustments | 39 | 0.1 | 112 | 0.1 | 30 | 0.0 | ||||||||||
$ | 24,162 | 26.1 | % | $ | 22,810 | 26.1 | % | $ | 20,359 | 28.3 | % | |||||
(1) | State and local income taxes in New York and New York City comprised greater than 50% of the tax effect in this category during the years ended Deember 31, 2025, 2024 and 2024. |
The following table presents income taxes paid, net of refunds received, for the periods presented:
(Dollars in thousands) | | 2025 | | 2024 | | 2023 | |||
Cash paid for Federal taxes | $ | 17,310 | $ | 17,560 | $ | 11,068 | |||
Cash paid for state and local taxes: | |||||||||
New York State | 2,333 | 1,353 | 2,584 | ||||||
New York City | 1,863 | 1,505 | 3,082 | ||||||
Other(1) | 273 | 1,085 | 1,239 | ||||||
Total cash paid for state and local taxes | 4,469 | 3,943 | 6,905 | ||||||
Total cash paid for income taxes | $ | 21,779 | $ | 21,503 | $ | 17,973 | |||
At December 31, 2025 and 2024, the Company’s deferred tax assets and liabilities consisted of the following:
December 31, | ||||||
(Dollars in thousands) | | 2025 | | 2024 | ||
Deferred tax assets: | ||||||
Allowance for credit losses | $ | 7,975 | $ | 5,551 | ||
Nonaccrual interest |
| 108 |
| 81 | ||
Deferred loan fees | 1,877 | 2,167 | ||||
Lease liabilities under operating leases | 4,339 | 2,331 | ||||
Unrealized losses on securities available for sale |
| 783 |
| 920 | ||
Fair value discount on acquired loans | 5,615 | — | ||||
Other | 637 | 698 | ||||
Total gross deferred tax assets | 21,334 | 11,748 | ||||
Deferred tax liabilities: | ||||||
Deferred mortgage servicing fees |
| (235) |
| (204) | ||
Deferred SBA servicing fees |
| (3,005) |
| (2,136) | ||
Premises and equipment | (2,248) | (512) | ||||
Right-of-use assets under operating leases | (4,307) | (2,305) | ||||
Interest rate derivatives | (1,421) | (5,778) | ||||
Core deposit intangible | (3,580) | — | ||||
Other | (531) | (655) | ||||
Total gross deferred tax liabilities | (15,327) | (11,590) | ||||
Net deferred tax assets | $ | 6,007 | $ | 158 | ||
During the year ended December 31, 2024, the Company sold $2.0 million of Georgia Low Income Housing Credits and repurchased these credits for the same amount, which extended the credit carryforward period. During the year ended December 31, 2025, the Company purchased an additional $15.0 million of Georgia Low Income Housing Credits and sold $2.5 million. These tax credits will be utilized to reduce the Company’s Georgia income tax liability. The Company utilized approximately $0.5 million of the tax credits in 2023, $1.1 million of the tax credits in 2024 and the remaining $19.9 million will be utilized against the Company’s Georgia income tax liability for the 2025 through 2029 tax years. The $19.9 million of remaining tax credits are recorded in Other Assets on the Consolidated Balance Sheets at December 31, 2025.
On July 4, 2025, the U.S. enacted the One Big Beautiful Bill Act ("the Act") that includes several U.S. corporate tax provisions, including the restoration of 100% bonus depreciation on qualified property and the current deductibility of domestic research and experimental expenditures. The provisions of the Act did not have a material impact on the Company’s income tax expense or effective tax rate.
Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. Management believes no valuation allowance is necessary against deferred tax assets as of December 31, 2025.
For the years ended December 31, 2025 and 2024, management believes there are no material amounts of uncertain tax position. Additionally, there were no amounts of interest and penalties recognized for uncertain tax positions in the consolidated balance sheets as of December 31, 2025 or 2024 or on the consolidated statements of income for the years ended December 31, 2025, 2024 or 2023. The Company and its subsidiary are subject to U.S. federal income tax, as well as various other state income taxes. With the exception of one state jurisdiction, the Company is no longer subject to examination by taxing authorities for years before 2022.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 16, 2026 | Showing above |
| 2024 | Mar 10, 2025 | |
| 2023 | Mar 11, 2024 | |
| 2022 | Mar 10, 2023 | |
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.