REPUBLIC BANCORP INC /KY/ Income Taxes Disclosure
18. | INCOME TAXES |
Allocation of federal and state income tax between current and deferred portion is as follows:
Years Ended December 31, (in thousands) | | 2025 | | 2024 | | 2023 | |||
Current expense: | |||||||||
Federal | $ | 22,562 | $ | 24,962 | $ | 22,015 | |||
State |
| 6,556 |
| 6,396 |
| 5,237 | |||
Deferred expense: | |||||||||
Federal | 5,742 | (4,232) | (3,329) | ||||||
State |
| (468) |
| (794) |
| (1,084) | |||
Total | $ | 34,392 | $ | 26,332 | $ | 22,839 | |||
Effective tax rates differ from federal statutory rate applied to income before income taxes due to the following:
Year Ended | ||||||
December 31, 2025 | ||||||
Reconciliation Item (in thousands) | Amount | Percent | ||||
U.S. federal statutory tax expense | $ | 34,799 | 21.00 | % | ||
State and local income taxes, net of federal benefit (1) | 5,112 | 3.08 | ||||
Tax Credits | | |||||
Low-income housing and historic tax credits | (3,891) | (2.35) | ||||
Other credits | (265) | (0.16) | ||||
Change in valuation allowance | 173 | 0.10 | ||||
Nontaxable or nondeductible items | (563) | (0.34) | ||||
Changes in unrecognized tax benefits | (454) | (0.27) | ||||
Other, net | (519) | (0.31) | ||||
Effective income tax expense | $ | 34,392 | 20.75 | % | ||
| (1) | The (more than 50%) of total state and local income taxes. |
Years Ended December 31, | 2024 | 2023 | ||||
Federal corporate tax rate | 21.00 | % | 21.00 | % | ||
Effect of: | ||||||
State taxes, net of federal benefit | 3.47 | 2.90 | ||||
Low-income housing and R&D tax credits | (3.12) | (2.67) | ||||
Nontaxable income | (1.03) | (1.38) | ||||
Tax benefit of vesting employee benefits | (0.11) | (0.06) | ||||
Other, net | 0.41 | 0.38 | ||||
Effective tax rate | 20.62 | 20.17 | ||||
For the year ended December 31, 2025, the Company made the following income tax payments, net of refunds received:
Jurisdiction (in thousands) | Cash Taxes Paid | ||
Federal | $ | 16,126 | |
State and local taxes: | |||
Kentucky | 2,850 | ||
All other states | 3,098 | ||
Total income taxes paid | $ | 22,074 | |
Year-end DTAs and DTLs were due to the following:
December 31, (in thousands) | | 2025 | | 2024 | ||
Deferred tax assets: | ||||||
Allowance for credit losses | $ | 22,062 | $ | 22,944 | ||
Operating lease liabilities | 8,367 | 9,261 | ||||
Accrued expenses |
| 7,982 |
| 7,306 | ||
Net operating loss carryforward(1) |
| 833 |
| 1,012 | ||
Acquisition fair value adjustments | 40 | 54 | ||||
Other-than-temporary impairment |
| 597 |
| 689 | ||
Fair value of cash flow hedges |
| 676 |
| 162 | ||
R&D capitalization |
| 490 |
| 5,923 | ||
Unrealized investment security losses | 792 | 4,584 | ||||
Other |
| 2,646 |
| 2,303 | ||
Total deferred tax assets |
| 44,485 |
| 54,238 | ||
Deferred tax liabilities: | ||||||
Right of use assets - operating leases | (8,098) | (9,027) | ||||
Depreciation and amortization | (2,473) | (2,996) | ||||
Federal Home Loan Bank dividends |
| (778) |
| (751) | ||
Deferred loan costs |
| (2,720) |
| (2,556) | ||
Lease Financing Receivables | (2,629) | (2,802) | ||||
Mortgage servicing rights |
| (1,760) |
| (1,740) | ||
Total deferred tax liabilities |
| (18,458) |
| (19,872) | ||
Less: Valuation allowance |
| (213) |
| — | ||
Net deferred tax asset | $ | 25,814 | $ | 34,366 | ||
| (1) | At December 31, 2025, the Company had federal and state net operating loss carryforwards (acquired in its 2016 Cornerstone Community Bank acquisition) of $3.7 million (federal) and $1.3 million (state). These carryforwards will begin to expire in 2030 for both federal and state purposes. The use of these federal and state carryforwards is each limited under Internal Revenue Code Section 382 to $722,000 annually for federal and $634,000 annually for state. Finally, the Company has state Alternative Minimum Tax credit carryforwards of $15,000 with no expiration date. |
Unrecognized Tax Benefits
A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:
Years Ended December 31, (in thousands) | | 2025 | | 2024 | | 2023 | |||
Balance, beginning of period | $ | 2,799 | $ | 2,862 | $ | 2,866 | |||
Additions based on tax related to the current period |
| 1,115 |
| 319 |
| 280 | |||
For the year ended December 31, 2025, the Company made the following income tax payments, net of refunds received: |
| — |
| 2 |
| 36 | |||
Reductions for tax positions of prior years | (720) | — | — | ||||||
Reductions due to the statute of limitations |
| (384) |
| (384) |
| (320) | |||
Balance, end of period | $ | 2,810 | $ | 2,799 | $ | 2,862 | |||
Of the 2025 total, $2.4 million represented the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods.
It is the Company’s policy to recognize interest and penalties as a component of income tax expense related to its unrecognized tax benefits. Amounts related to interest and penalties recorded in the income statements and accrued on the balance sheets follows:
Years Ended December 31, (in thousands) | | 2025 | | 2024 | | 2023 | |||
Interest and penalties recorded in the income statement as a component of income tax expense | $ | (59) | $ | (68) | $ | 314 | |||
Interest and penalties accrued on balance sheet |
| 1,037 |
| 1,096 |
| 1,163 | |||
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by taxing authorities for all years prior to and including 2020. With a few exceptions, which are immaterial in the aggregate, the Company is no longer subject to state income tax examinations for all years prior to and including 2020.
On July 4, 2025, new tax legislation referred to as the One Big Beautiful Bill Act was enacted into law by the federal government. The tax provisions of the One Big Beautiful Bill Act did not have a material impact on the Company’s income tax expense. The retroactive extension of bonus depreciation and the repeal requiring the capitalization of research and development expenditures has afforded the Company additional income tax deductions for 2025, reducing the anticipated income taxes payable for 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 6, 2026 | Showing above |
| 2024 | Mar 6, 2025 | |
| 2023 | Mar 14, 2024 | |
| 2022 | Mar 3, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Mar 13, 2020 | |
| 2018 | Mar 15, 2019 | |
| 2017 | Mar 9, 2018 | |
| 2016 | Mar 10, 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.