SOUTHERN FIRST BANCSHARES INC Income Taxes Disclosure
NOTE 15 – Income Taxes
The Company has elected to adopt ASU 2023-09 retrospectively. The components of income tax expense were as follows:
| For the years ended December 31, | ||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2023 | |||||||||
| Current income taxes: | ||||||||||||
| Federal | $ | 9,182 | 4,992 | 3,769 | ||||||||
| State | 1,360 | 623 | 460 | |||||||||
| Total current tax expense | 10,542 | 5,615 | 4,229 | |||||||||
| Deferred income benefit: | ||||||||||||
| Federal | (1,284 | ) | (857 | ) | (228 | ) | ||||||
| State | (19 | ) | (376 | ) | ||||||||
| Total deferred income benefit | (1,303 | ) | (1,233 | ) | (228 | ) | ||||||
| Income tax expense | $ | 9,239 | 4,382 | 4,001 | ||||||||
The following is a summary of the items that caused recorded income taxes to differ from taxes computed using the statutory tax rate:
| For the years ended December 31, | ||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||
| (dollars in thousands) | Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||
| Tax expense at statutory rate | $ | 8,317 | 21.00 | % | $ | 4,182 | 21.00 | % | $ | 3,660 | 21.00 | % | ||||||||||||
| Effect of state income taxes, net of federal benefit(1) | 1,059 | 2.67 | % | 195 | 0.98 | % | 364 | 2.09 | % | |||||||||||||||
| Non-taxable or nondeductible items: | ||||||||||||||||||||||||
| Exempt Income | 5 | 0.01 | % | 13 | 0.07 | % | 7 | 0.04 | % | |||||||||||||||
| Effect of stock-based compensation | (49 | ) | (0.12 | )% | 128 | 0.64 | % | 133 | 0.76 | % | ||||||||||||||
| Other | (93 | ) | (0.23 | )% | (136 | ) | (0.68 | )% | (163 | ) | (0.94 | )% | ||||||||||||
| Income tax expense | $ | 9,239 | 23.33 | % | $ | 4,382 | 22.01 | % | $ | 4,001 | 22.96 | % | ||||||||||||
| (1) | State taxes in South Carolina made up the majority (greater than 50 percent) of the tax effect in this category. |
The following table presents income taxes paid (net of refunds received).
| For the years ended December 31, | ||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2023 | |||||||||
| Federal | $ | 9,410 | 3,295 | 925 | ||||||||
| State | ||||||||||||
| South Carolina | 1,046 | 450 | 300 | |||||||||
| Georgia | 41 | 185 | ||||||||||
| North Carolina | 23 | 110 | 103 | |||||||||
| Alabama | (3 | ) | 1 | |||||||||
| Income tax expense | $ | 10,517 | 3,855 | 1,514 | ||||||||
The components of the deferred tax assets and liabilities are as follows:
| December 31, | ||||||||
| (dollars in thousands) | 2025 | 2024 | ||||||
| Deferred tax assets: | ||||||||
| Allowance for credit losses | $ | 9,125 | 8,636 | |||||
| Reserve for unfunded commitments | 422 | 315 | ||||||
| Unrealized loss on securities available for sale | 1,982 | 3,050 | ||||||
| Net deferred loan fees | 1,214 | 1,343 | ||||||
| Deferred compensation | 1,668 | 1,557 | ||||||
| Accrued bonuses | 808 | 687 | ||||||
| Lease liabilities | 4,664 | 4,999 | ||||||
| Other | 659 | 608 | ||||||
| Total deferred tax assets | 20,542 | 21,195 | ||||||
| Deferred tax liabilities: | ||||||||
| Property and equipment | 2,329 | 2,892 | ||||||
| Hedging transactions | 99 | 79 | ||||||
| Prepaid expenses | 293 | 302 | ||||||
| ROU assets | 4,082 | 4,435 | ||||||
| Other | 37 | 20 | ||||||
| Total deferred tax liabilities | 6,840 | 7,728 | ||||||
| Net deferred tax asset | $ | 13,702 | 13,467 | |||||
The Company has analyzed the tax positions taken or expected to be taken in its tax returns and concluded it has no liability related to uncertain tax positions.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Mar 5, 2024 | |
| 2022 | Feb 13, 2023 | |
| 2021 | Mar 4, 2022 | |
| 2020 | Mar 2, 2021 | |
| 2019 | Mar 2, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Mar 3, 2017 | |
| 2015 | Mar 2, 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.