1ST SOURCE CORPSRCE

1ST SOURCE CORP Income Taxes Disclosure

10-KFiled Feb 17, 20262 min read
Income Taxes
The following table shows the composition of income tax expense.
Year Ended December 31 (Dollars in thousands) 
202520242023
Current:   
Federal$45,002 $31,826 $40,073 
State6,520 4,181 6,135 
Total current51,522 36,007 46,208 
Deferred:   
Federal(4,838)2,044 (7,917)
State(566)388 (1,545)
Total deferred(5,404)2,432 (9,462)
Total provision$46,118 $38,439 $36,746 
The following table shows the composition of income taxes paid (refunded). State taxes are disclosed for years when they exceed 5% of the total net taxes paid (refunded).
Year Ended December 31 (Dollars in thousands) 
202520242023
Federal$(10,712)$7,700 $12,200 
State4,027 3,581 5,599 
Total$(6,685)$11,281 $17,799 
State:
Indiana$1,900 $1,850 $3,800 
Illinois365 — — 
California422 — — 
The following table shows the reasons for the difference between income tax expense and the amount computed by applying the U.S. federal statutory income tax rate (21%) to income before income taxes.
 202520242023
Year Ended December 31 (Dollars in thousands)
AmountPercent of Pretax IncomeAmountPercent of Pretax IncomeAmountPercent of Pretax Income
U.S. federal statutory income tax$42,919 21.0 %$35,922 21.0 %$33,953 21.0 %
(Decrease) increase in income taxes resulting from:      
State taxes, net of federal income tax benefit(1)
4,703 2.3 3,610 2.1 3,626 2.2 
Tax credits(861)(0.4)(701)(0.4)(510)(0.3)
Nontaxable or nondeductible items(643)(0.3)(392)(0.2)(323)(0.2)
Total$46,118 22.6 %$38,439 22.5 %$36,746 22.7 %
(1) State taxes in Indiana made up the majority (greater than 50%) of the tax effect.
The tax benefit related to losses on investment securities available-for-sale for the years 2025, 2024, and 2023 was approximately $2.09 million, $0.94 million and $0.72 million, respectively.
The following table shows the composition of deferred tax assets and liabilities as of December 31, 2025 and 2024.
(Dollars in thousands) 20252024
Deferred tax assets:  
Allowance for credit losses$39,865 $34,738 
Operating lease liability3,989 4,371 
Accruals for employee benefits5,223 4,361 
Tax credit carryover2,546 — 
Net unrealized losses on securities available-for-sale11,165 27,153 
Other3,373 1,838 
Total deferred tax assets66,161 72,461 
Deferred tax liabilities:  
Differing depreciable bases in premises and leased equipment3,442 4,782 
Right of use assets - leases4,848 5,075 
Differing bases in assets related to acquisitions4,303 4,335 
Tax advantaged partnerships5,957 574 
Other2,652 2,152 
Total deferred tax liabilities21,202 16,918 
Net deferred tax asset$44,959 $55,543 
No valuation allowance for deferred tax assets was recorded at December 31, 2025 and 2024 as the Company believes it is more likely than not that all of the deferred tax assets will be realized.
Tax years that remain open and subject to audit include the federal 2022-2025 years and the Indiana 2022-2025 years. The Company does not anticipate a significant change in the amount of uncertain tax positions within the next 12 months.

Historical Timeline

Fiscal YearFiled
2025Feb 17, 2026Showing above
2024Feb 18, 2025
2023Feb 20, 2024
2022Feb 16, 2023
2021Feb 17, 2022
2020Feb 18, 2021
2019Feb 20, 2020
2018Feb 22, 2019
2017Feb 16, 2018
2016Feb 17, 2017
2015Feb 19, 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.

Other Available Disclosures

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