INCOME TAXES
The amount of the Company’s income tax expense from continuing operations was as follows for the dates indicated below:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2025 | | 2024 | | 2023 |
| (In thousands) |
| Current income tax expense | $ | 26,651 | | | $ | 26,659 | | | $ | 21,137 | |
| Deferred income tax (benefit) expense | (1,741) | | | 3,298 | | | 10,250 | |
| Income tax expense, as reported | $ | 24,910 | | | $ | 29,957 | | | $ | 31,387 | |
A reconciliation between reported income tax expense and the amounts computed by applying the U.S. federal statutory income tax rate of 21% to income before income taxes is presented in the following table. There were no activities or transactions that
had foreign income taxes or cross-border tax effects during the reported periods. State income/franchise taxes are primarily related to the State of Texas, while amounts related to other jurisdictions were not significant, in the aggregate, during the reported periods.
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| Years Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Amount | | Percent | | Amount | | Percent | | Amount | | Percent |
| (Dollars in thousands) |
| U.S. federal income tax expense computed at statutory rate | $ | 26,835 | | | 21.0% | | $ | 30,444 | | | 21.0% | | $ | 33,995 | | | 21.0% |
| State income/franchise taxes, net of U.S. federal income tax effects | — | | | 0.0% | | — | | | 0.0% | | — | | | 0.0% |
| Effect of changes in tax laws or rates enacted during the year | — | | | 0.0% | | — | | | 0.0% | | — | | | 0.0% |
| Transferable energy tax credits | (938) | | | (0.7%) | | — | | | 0.0% | | — | | | 0.0% |
| Non-taxable or non-deductible items: | | | | | | | | | | | |
| Effect of tax-exempt income | (1,514) | | | (1.2%) | | (1,510) | | | (1.0)% | | (1,943) | | | (1.2)% |
| Non-deductible merger expenses | — | | | 0.0% | | — | | | 0.0% | | 10 | | | 0.0% |
| Bank-owned life insurance | (606) | | | (0.5%) | | (507) | | | (0.3%) | | (457) | | | (0.3%) |
| Executive compensation limitation | 807 | | | 0.6% | | 231 | | | 0.1% | | 152 | | | 0.1% |
| FDIC assessment limitation | 26 | | | 0.0% | | 23 | | | 0.0% | | 26 | | | 0.0% |
| Excise tax on share repurchases | 134 | | | 0.1% | | — | | | 0.0% | | — | | | 0.0% |
| Other, net | 59 | | | 0.1% | | 1,140 | | | 0.8% | — | | (335) | | | (0.2%) |
| Net tax benefit from stock-based compensation | 107 | | | 0.1% | | 136 | | | 0.1% | | (61) | | | 0.0% |
| Income tax expense and effective tax rate, as reported | $ | 24,910 | | | 19.5% | | $ | 29,957 | | | 20.7% | | $ | 31,387 | | | 19.4% |
Deferred taxes as of December 31, 2025 and 2024 are based on the 21% maximum federal statutory tax rate. Deferred tax assets and liabilities were as follows:
| | | | | | | | | | | |
| December 31, |
| 2025 | | 2024 |
| (In thousands) |
| Deferred tax assets: | | | |
| Allowance for credit losses on loans and unfunded commitments | $ | 21,969 | | | $ | 20,457 | |
| Deferred loan fees | 62 | | | 62 | |
| Deferred compensation | 2,367 | | | 2,621 | |
| Loans and securities purchase accounting adjustments | 11,415 | | | 15,485 | |
| Net unrealized loss on available for sale securities | 19,393 | | | 33,322 | |
| Other deferred assets | 1,647 | | | 1,760 | |
| Total deferred tax assets | 56,853 | | | 73,707 | |
| Deferred tax liabilities: | | | |
| Core deposit intangible and other purchase accounting adjustments | (15,409) | | | (19,922) | |
| Premises and equipment basis difference | (2,336) | | | (2,633) | |
| Total deferred tax liabilities | (17,745) | | | (22,555) | |
| Net deferred tax assets | $ | 39,108 | | | $ | 51,152 | |
Interest and penalties related to tax positions are recognized in the period in which they begin accruing or when the entity claims the position that does not meet the minimum statutory thresholds. The Company does not have any material uncertain tax positions and does not have any interest or penalties recorded in the income statement for the years ended December 31, 2025, 2024 and 2023. The Company is no longer subject to examination by the U.S. Federal Tax Jurisdiction for the years prior to 2022.
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.