FIRST FINANCIAL CORP /IN/ Income Taxes Disclosure
14.INCOME TAXES:
Income tax expense is summarized as follows:
(Dollar amounts in thousands) | | 2025 | | 2024 | | 2023 | |||
Federal: |
| |
| |
| | |||
Currently payable | $ | 15,465 | $ | 11,028 | $ | 9,047 | |||
Deferred |
| 513 |
| (3,067) |
| 263 | |||
| 15,978 |
| 7,961 |
| 9,310 | ||||
State: |
| |
| |
| | |||
Currently payable |
| 3,255 |
| 2,131 |
| 2,302 | |||
Deferred |
| 273 |
| (213) |
| 209 | |||
| 3,528 |
| 1,918 |
| 2,511 | ||||
TOTAL | $ | 19,506 | $ | 9,879 | $ | 11,821 | |||
The Corporation has no foreign operations and therefore no foreign tax expense.
The reconciliation of income tax expense with the amount computed by applying the statutory federal income tax rate of 21% to income before income taxes is summarized as follows:
(Dollar amounts in thousands) | | 2025 | 2024 | | 2023 | |||||||||||||
Amount | Rate | Amount | Rate | Amount | Rate | |||||||||||||
Federal income taxes computed at the statutory rate | $ | 20,730 | 21.0 | % | $ | 12,002 | 21.0 | % | $ | 15,223 | 21.0 | % | ||||||
Effect of: |
| |
| |
| | ||||||||||||
State tax, net of federal benefit (1) |
| 2,787 | 2.8 |
| 1,515 | 2.6 |
| 1,984 | 2.7 | |||||||||
Tax credits | ||||||||||||||||||
Low Income Housing Tax Credits(2) |
| (871) | (0.9) |
| (542) | (0.9) |
| (1,720) | (2.4) | |||||||||
Nontaxable or nondeductible items |
|
|
| |||||||||||||||
Tax Exempt Interest Income, net of TEFRA | (2,758) | (2.8) | (2,905) | (5.1) | (2,942) | (4.1) | ||||||||||||
Tax Exempt BOLI Income | (533) | (0.5) | (490) | (0.8) | (607) | (0.8) | ||||||||||||
Nondeductible compensation | 733 | 0.7 | 293 | 0.5 | 193 | 0.3 | ||||||||||||
Other | (141) | (0.1) | 5 | 0.0 | (18) | 0.0 | ||||||||||||
Other adjustments |
| (441) | (0.4) |
| 1 | 0.0 |
| (292) | (0.4) | |||||||||
Effective tax rate | $ | 19,506 | 19.8 | % | $ | 9,879 | 17.3 | % | $ | 11,821 | 16.3 | % | ||||||
(1) States and local jurisdictions that make up the majority (greater than 50 percent) of the tax effect in this category include Illinois and Indiana for 2025, 2024, and 2023.
(2) Includes tax credits, other tax benefits, and certain costs associated with LIHTC investments. The amortization related to LIHTC investments is recognized in income tax expense in 2025 and 2024 with the adoption of PAM on January 1, 2024, and net with credit on this table. In 2023, the amortization was recorded in other noninterest expense.
Income taxes were paid as follows:
(Dollar amounts in thousands) | 2025 | 2024 | 2023 | |||||
Amount | Amount | Amount | ||||||
Federal income taxes | $ | 10,305 | $ | 8,830 | $ | 9,450 | ||
State and local(1) | ||||||||
Illinois |
| 1,095 |
| 700 |
| 958 | ||
Indiana |
| 770 |
| 975 |
| 442 | ||
Other |
| 960 |
| (25) |
| 500 | ||
TOTAL | $ | 13,130 | $ | 10,480 | $ | 11,350 | ||
(1) The amount of income taxes paid to a particular state or jurisdiction is disclosed only for those states and jurisdictions that meet the 5% disaggregation threshold in a given year. Taxes paid to states and jurisdictions that do not meet the 5% disaggregation threshold in a given year are included in Other.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2025 and 2024, are as follows:
(Dollar amounts in thousands) | | 2025 | | 2024 | ||
Deferred tax assets: |
| |
| | ||
Other than temporary impairment | $ | 742 | $ | 742 | ||
Net unrealized losses on retirement plans |
| 1,108 |
| 1,493 | ||
Net unrealized loss on available for sale securities |
| 24,861 |
| 38,000 | ||
Loan loss provisions |
| 11,970 |
| 11,543 | ||
Unfunded commitments |
| 730 |
| 530 | ||
Deferred compensation |
| 1,239 |
| 1,863 | ||
Compensated absences |
| 328 |
| 814 | ||
Post-retirement benefits |
| 1,115 |
| 1,188 | ||
Lease liability |
| 1,882 |
| 1,953 | ||
Other |
| 3,923 |
| 4,147 | ||
GROSS DEFERRED ASSETS |
| 47,898 |
| 62,273 | ||
Deferred tax liabilities: |
| |
| | ||
Depreciation |
| (629) |
| (236) | ||
Mortgage servicing rights |
| (120) |
| (204) | ||
Pensions |
| (1,918) |
| (1,594) | ||
Right-of-use asset |
| (1,842) |
| (1,927) | ||
Intangibles |
| (5,892) |
| (6,246) | ||
Purchase accounting |
| (333) |
| (189) | ||
Other |
| (3,457) |
| (3,860) | ||
GROSS DEFERRED LIABILITIES |
| (14,191) |
| (14,256) | ||
NET DEFERRED TAX ASSETS | $ | 33,707 | $ | 48,017 | ||
Unrecognized Tax Benefits — A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(Dollar amounts in thousands) | | 2025 | | 2024 | | 2023 | |||
Balance at January 1 | $ | 778 | $ | 826 | $ | 858 | |||
Additions based on tax positions related to the current year |
| 166 |
| 126 |
| 74 | |||
Additions based on tax positions related to prior years |
| — |
| — |
| — | |||
Reductions due to the statute of limitations |
| (298) |
| (174) |
| (106) | |||
Balance at December 31 | $ | 646 | $ | 778 | $ | 826 | |||
Of this total, $646 thousand represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. The Corporation does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next 12 months.
The total amount of interest and penalties recorded in the income statement for the years ended December 31, 2025, 2024 and 2023 was an expense increase of $15 thousand, an increase of $8 thousand, and an increase of $18 thousand, respectively. The amount accrued for interest and penalties at December 31, 2025, 2024 and 2023 was $144 thousand, $129 thousand and $121 thousand, respectively.
The Corporation and its subsidiaries are subject to U.S. federal income tax as well as income tax of the states of Indiana, Illinois, Kentucky, Tennessee, Georgia, and other states. The Corporation is no longer subject to examination by taxing authorities for years before 2022.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 4, 2026 | Showing above |
| 2024 | Mar 5, 2025 | |
| 2023 | Mar 11, 2024 | |
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.