Triumph Financial, Inc.TFIN
Triumph Financial, Inc. Income Taxes Disclosure
INCOME TAXES
Net income before income tax expense and significant components of income tax expense consisted of the following:
| Years Ended | |||||
| (Dollars in thousands) | December 31, 2025 | ||||
| Net income before income tax expense | $ | 32,991 | |||
| Income tax expense: | |||||
| Current | |||||
| Federal | $ | 884 | |||
| State | 457 | ||||
| Deferred | |||||
| Federal | 4,939 | ||||
| State | 1,332 | ||||
| Change in valuation allowance for deferred tax asset | 20 | ||||
| Income tax expense | $ | 7,632 | |||
| Years Ended December 31, | |||||||||||
| (Dollars in thousands) | 2024 | 2023 | |||||||||
| Income tax expense: | |||||||||||
| Current | $ | 9,162 | $ | 5,195 | |||||||
| Deferred | (4,760) | 6,549 | |||||||||
| Change in valuation allowance for deferred tax asset | (24) | (10) | |||||||||
| Income tax expense | $ | 4,378 | $ | 11,734 | |||||||
The Company does not have any material pre-tax income or income tax expense in foreign jurisdictions.
Income taxes paid, net of refunds received by jurisdiction consisted of the following:
| Years Ended December 31, | |||||
| (Dollars in thousands) | 2025 | ||||
| Income taxes paid, net of refunds received: | |||||
| Federal | $ | (1,500) | |||
| State | |||||
| California | 401 | ||||
| Illinois | 289 | ||||
| Texas | 346 | ||||
| Other | 418 | ||||
| Total state taxes paid, net of refunds received | 1,454 | ||||
| Total income taxes paid, net of refunds received | $ | (46) | |||
Effective tax rates differ from federal statutory rates applied to income before income taxes due to the following for the year ended December 31, 2025:
| Years Ended December 31, | |||||||||||
| 2025 | |||||||||||
| (Dollars in thousands) | Amount | Percent | |||||||||
| Tax provision computed at federal statutory rate | $ | 6,928 | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect(1) | 1,374 | 4.2 | % | ||||||||
| Effects of changes in tax laws or rates enacted in the current period | (199) | (0.6) | % | ||||||||
| Tax Credits | |||||||||||
| Research and development tax credits | (2,990) | (9.1) | % | ||||||||
| Other | (1) | — | % | ||||||||
| Changes in valuation allowances | 20 | 0.1 | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
Stock-based compensation(2) | 1,119 | 3.4 | % | ||||||||
| Non-deductible executive compensation | 331 | 1.0 | % | ||||||||
| Non-deductible meals and entertainment | 834 | 2.5 | % | ||||||||
| Bank-owned life insurance | (443) | (1.3) | % | ||||||||
| Other | 250 | 0.8 | % | ||||||||
| Other | 409 | 1.1 | % | ||||||||
| Effective tax rate | $ | 7,632 | 23.1 | % | |||||||
(1) State taxes in Illinois and California made up the majority (greater than 50%) of the tax effect in this category for 2025.
(2) Includes excess benefits and shortfalls from restricted stock vesting and stock option exercises.
Effective tax rates differ from federal statutory rates applied to income before income taxes due to the following for the years ended December 31, 2024 and 2023:
| Years Ended Years Ended December 31, | |||||||||||
| (Dollars in thousands) | 2024 | 2023 | |||||||||
| Tax provision computed at federal statutory rate | $ | 4,298 | $ | 11,091 | |||||||
| Effect of: | |||||||||||
| State taxes, net | 1,417 | 1,920 | |||||||||
| Stock-based compensation | (168) | (2,661) | |||||||||
| Non-deductible executive compensation | 562 | 1,943 | |||||||||
| Non-deductible meals and entertainment | 887 | 808 | |||||||||
| Federal tax credits | (835) | (835) | |||||||||
| Bank-owned life insurance | (138) | (78) | |||||||||
| Changes in valuation allowances | (24) | (10) | |||||||||
| Other | (1,621) | (444) | |||||||||
| Effective tax rate | $ | 4,378 | $ | 11,734 | |||||||
Deferred income taxes reflect the net tax effects of temporary differences between the recorded amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:
| (Dollars in thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets | |||||||||||
| Federal net operating loss carryforwards | $ | 10,560 | $ | 4,727 | |||||||
| State net operating loss carryforwards | 1,812 | 1,432 | |||||||||
| Stock-based compensation | 4,995 | 5,132 | |||||||||
| Unrealized loss on securities available for sale | 566 | 985 | |||||||||
| Allowance for credit losses | 10,289 | 11,538 | |||||||||
| Accrued liabilities | 5,931 | 5,949 | |||||||||
| Lease liability | 6,004 | 6,939 | |||||||||
| Qualified research expenses | 245 | 9,251 | |||||||||
| Other | 5,034 | 919 | |||||||||
| Total deferred tax assets | 45,436 | 46,872 | |||||||||
| Deferred tax liabilities | |||||||||||
| Goodwill and intangible assets | 22,431 | 10,633 | |||||||||
| Fair value adjustment on junior subordinated debentures | 1,867 | 1,970 | |||||||||
| Premises and equipment | 11,891 | 12,228 | |||||||||
| Lease right-of-use asset | 5,510 | 6,320 | |||||||||
| Equity securities without readily determinable fair value | 1,704 | 1,669 | |||||||||
| Other | 1,539 | 178 | |||||||||
| Total deferred tax liabilities | 44,942 | 32,998 | |||||||||
| Net deferred tax asset before valuation allowance | 494 | 13,874 | |||||||||
| Valuation allowance | (313) | (293) | |||||||||
| Net deferred tax asset | $ | 181 | $ | 13,581 | |||||||
The Company's federal and state net operating loss carryforwards as of December 31, 2025 were $50,288,000 and $27,621,000, respectively, which will expire at various dates from 2031 through 2032, with the exception of $40,446,000 of net operating loss carryforwards that will not expire. The Company has a valuation allowance on certain net operating loss carryforwards that are not expected to be realized before expiration.
The Company's federal and state net operating loss carryforwards as of December 31, 2024 were $22,509,000 and $24,685,000, respectively.
An Internal Revenue Code Section 382 (“Section 382”) ownership change was triggered as part of previous acquisitions. A significant portion of the deferred tax asset relating to the Company's net operating loss carryforwards is subject to the annual limitation rules under Section 382. The utilization of tax carryforward attributes acquired from the EJ Financial Corp. (2010) acquisition is subject to an annual limitation of $341,000, with $1,985,000 of carryforwards remaining at December 31, 2025. The utilization of tax carryforward attributes acquired from the National Bancshares, Inc. (2013) acquisition is subject to an annual limitation of $2,040,000, with $7,856,000 of carryforwards remaining at December 31, 2025. The utilization of tax carryforward attributes acquired from HubTran, Inc. (2021) is subject to an annual limitation of $1,594,000, with $12,668,000 of carryforwards remaining at December 31, 2025. The utilization of tax carryforward attributes acquired from the Greenscreens AI, Inc. (2025) acquisition is subject to an annual limitation of $5,527,000, with $17,134,000 of carryforwards remaining at December 31, 2025.
At December 31, 2025 and 2024, the Company had no amounts recorded for uncertain tax positions and does not expect any material changes in uncertain tax benefits during the next 12 months. The Company recognizes interest and penalties related to income tax matters in income tax expense.
The Company is subject to U.S. federal income tax as well as income tax in various states. The Company is generally not subject to examination by taxing authorities for years prior to 2022.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 11, 2026 | Showing above |
| 2024 | Feb 11, 2025 | |
| 2023 | Feb 13, 2024 | |
| 2022 | Feb 15, 2023 | |
| 2021 | Feb 14, 2022 | |
| 2020 | Feb 12, 2021 | |
| 2019 | Feb 11, 2020 | |
| 2018 | Feb 12, 2019 | |
| 2017 | Feb 13, 2018 | |
| 2016 | Feb 17, 2017 | |
| 2015 | Feb 26, 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.