OLD SECOND BANCORP INC Income Taxes Disclosure
Note 11: Income Taxes
Income Taxes Paid – ASU 2023-09 Disaggregation
| 2025 | | 2024 | | 2023 | ||||
Federal | $ | 15,125 | $ | 17,943 | $ | 24,500 | |||
States & local | |||||||||
Illinois | 3,750 | 3,650 | 10,430 | ||||||
All other states & local | 1,817 | 1,367 | 732 | ||||||
Foreign | - | - | - | ||||||
Total net cash taxes paid in the current period | $ | 20,692 | $ | 22,960 | $ | 35,662 | |||
Pretax income is entirely related to domestic activities, the Company did not have any foreign operations.
The components of income tax expense from continuing operations consisted of the following:
| 2025 | | 2024 | | 2023 | ||||
Current tax expense: | |||||||||
Federal | $ | 18,707 | $ | 22,011 | $ | 20,724 | |||
State | 7,141 | 7,048 | 10,098 | ||||||
Total | 25,848 | 29,059 | 30,822 | ||||||
Deferred tax expense (benefit): | |||||||||
Federal | 1,589 | (1,419) | 1,964 | ||||||
State | 4 | 52 | (107) | ||||||
Total | 1,593 | (1,367) | 1,857 | ||||||
Net provision for income taxes from continuing operations | $ | 27,441 | $ | 27,692 | $ | 32,679 | |||
Effective tax rates differ from federal statutory rates applied to financial statement income for the years ended December 31, due to the following:
| 2025 | | 2024 | | 2023 | |||||||||||||
Amount | % of Pretax Income | Amount | % of Pretax Income | Amount | % of Pretax Income | |||||||||||||
Tax computed at the statutory federal rate | $ | 22,628 | 21.0 | % | $ | 23,721 | 21.0 | % | $ | 26,126 | 21.0 | % | ||||||
State and local income taxes, net of federal benefit 1 | 5,645 | 5.2 | 5,775 | 5.1 | 7,911 | 6.4 | ||||||||||||
Nontaxable or nondeductible Items | ||||||||||||||||||
BOLI income | (763) | (0.7) | (951) | (0.8) | (429) | (0.3) | ||||||||||||
Tax exempt interest, net | (792) | (0.7) | (820) | (0.7) | (947) | (0.8) | ||||||||||||
Other adjustments | ||||||||||||||||||
Stock based compensation | (226) | (0.2) | (139) | (0.1) | (132) | (0.1) | ||||||||||||
Other, net | 949 | 0.9 | 106 | - | 150 | 0.1 | ||||||||||||
$ | 27,441 | 25.5 | % | $ | 27,692 | 24.5 | % | $ | 32,679 | 26.3 | % | |||||||
1 State taxes in Illinois made up the majority (greater than 50%) of the tax effect in this category.
The Company and its subsidiaries are subject to U.S. federal income tax as well as various state taxing jurisdictions. The Company is no longer subject to federal examination for tax years prior to 2022.
The components of the net deferred tax asset at December 31, 2025 and 2024 are as follows:
| 2025 | | 2024 | |||
Deferred tax assets: | ||||||
Net operating loss and tax credit carryforwards | $ | 2,727 | $ | - | ||
Accrued bonus | 3,213 | 2,601 | ||||
Allowance for credit losses | 19,783 | 12,241 | ||||
Deferred compensation | 2,430 | 2,100 | ||||
Stock based compensation | 2,231 | 1,920 | ||||
Business combination adjustments | 2,950 | - | ||||
Lease liability | 3,357 | 3,315 | ||||
Unrealized loss on securities available for sale 1 | 12,059 | 18,145 | ||||
Unrealized loss on derivatives 1 | - | 423 | ||||
Other assets | 1,795 | 2,357 | ||||
Total deferred tax assets | 50,545 | 43,102 | ||||
Deferred tax liabilities: | ||||||
Accumulated depreciation on premises and equipment | (7,285) | (5,844) | ||||
Goodwill amortization/impairment | (871) | (604) | ||||
Mortgage servicing rights | (2,484) | (2,728) | ||||
Unrealized gain on derivatives 1 | (883) | - | ||||
Amortization of core deposit intangible | (2,925) | (2,248) | ||||
Right of use asset | (2,103) | (1,972) | ||||
Acquired securities | (1,961) | (1,997) | ||||
Other liabilities | (757) | (1,090) | ||||
Total deferred tax liabilities | (19,269) | (16,483) | ||||
Net deferred tax asset | $ | 31,276 | $ | 26,619 | ||
1 Represents the amount of deferred taxes recorded in accumulated other comprehensive income.
As part of the acquisition of Evergreen in 2025, the Company acquired various federal and state net operating loss carryforwards which are limited under Section 382 of the Internal Revenue Code. As of December 31, 2025, the Company had $11,779 of federal net operating loss carryforwards, $2,219 of Illinois net operating loss carryforwards, and various other immaterial state and local net operating loss carryforwards. The Company expects to utilize all loss carryforwards.
At December 31, 2024, the Company had no federal net operating loss carryforwards and no state net operating loss carryforwards.
The Company evaluated positive and negative evidence in order to determine if it was more likely than not that the deferred tax asset would be recovered through future income. Significant positive evidence evaluated included recent and projected earnings, strong asset quality and capital position. No significant negative evidence was noted.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Mar 6, 2025 | |
| 2023 | Mar 7, 2024 | |
| 2022 | Mar 9, 2023 | |
| 2021 | Mar 10, 2022 | |
| 2020 | Mar 8, 2021 | |
| 2019 | Mar 6, 2020 | |
| 2018 | Mar 7, 2019 | |
| 2017 | Mar 13, 2018 | |
| 2016 | Mar 13, 2017 | |
| 2015 | Mar 11, 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.