v3.26.1
Income Taxes
 6 Months Ended
Jun. 30, 2026
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Our income tax expense for the six months ended June 30, 2026 and 2025 differs from the amount computed by applying the statutory federal income tax rate to income before income taxes. The sources and tax effects of the differences are as follows:
Six Months Ended June 30,
20262025
U.S. federal statutory tax rate21.0 %21.0 %
State income taxes, net of federal tax benefit1.5 5.7 
Foreign tax rate differential— 0.3 
General business credits(2.2)1.6 
IRC 162(m) limitation(0.4)2.3 
Stock-based compensation(0.1)(4.9)
Bank-owned life insurance income(2.3)2.0 
Nondeductible expenses0.3 (0.3)
Nondeductible transaction related costs0.7 — 
Change in valuation allowance2.3 — 
Global intangible low-tax income tax— (0.2)
Other0.1 (0.1)
Effective tax rate20.9 %27.4 %
The effective tax rate for the six months ended June 30, 2026 and 2025 differs from the statutory federal income tax rate of 21%, primarily due to state income taxes, net of federal tax benefits, general business credits, stock-based compensation, cash surrender value growth in bank owned life insurance policies, the Internal Revenue Code (the "IRC") 162(m) limitation on the deductibility of executive compensation, and the change in valuation allowance. The net decrease in the effective tax rate for the six months ended June 30, 2026 from the prior year comparable period was due to several factors, including a decrease of $1.4 million in tax expense associated with shortfalls from stock-based compensation, an increase of $0.9 million in the tax benefit from the cash surrender value in bank-owned life insurance policies, and a higher tax rate benefit due to an increase of $1.0 million in general business credits. These decreases were partially offset by an increase of $2.7 million in state income taxes expense, net of federal benefits, an increase of $0.4 million in the amount of compensation expense that was subject to the IRC 162(m) limitation on the deductibility of certain executive compensation, an increase of $0.4 million in nondeductible transaction related costs, and an increase in the valuation allowance recorded against our 2026 federal and state research credits. For the six months ended June 30, 2026, we recorded valuation allowances of $1.1 million against our 2026 federal research credits, which is reflected in change in valuation allowance, and $1.1 million against our 2026 state research credits, reflected in state income taxes, net of federal tax benefit in our effective tax rate reconciliation.
We have made a policy election to account for Global Intangible Low-Taxed Income ("GILTI") in the year the GILTI tax is incurred. For the six months ended June 30, 2026 and 2025, the provision for GILTI tax expense was not material to our financial statements.
We establish a valuation allowance when we consider it more-likely-than-not that some portion or all of the deferred tax assets will not be realized. As of June 30, 2026, we have a valuation allowance recorded against our 2026 federal research credits, state research credits, certain state net operating loss carryforwards, a portion of our capital loss carryforwards, and the deferred tax assets of our China subsidiary as we believe it is more-likely-than-not that the tax benefits related to these items will not be realized. During the six months ended June 30, 2026, we recorded a valuation allowance of approximately $2.2 million against our 2026 federal and state research credits as we determined it was more-likely-than-not that the benefit of these credits would not be realized; accordingly, no tax benefit was recognized for the 2026 federal and state research credits in the current period. All other valuation allowances previously recorded as of December 31, 2025 remained unchanged. As of December 31, 2025, we recorded a valuation allowance of approximately $21.6 million against our state research credits, certain state net operating loss carryforwards, a portion of our capital loss carryforwards, and the deferred tax assets of our China subsidiary as we determined it was more-likely-than-not that the tax benefits related to these items would not be realized.
Note 10—Income Taxes (continued)
We are subject to examination by the Internal Revenue Service (the "IRS"), and various state tax authorities. We remain subject to examination of our federal income tax returns for the years ended December 31, 2022 through 2025. We generally remain subject to examination of our various state income tax returns for a period of four to five years from the respective dates that the returns were filed.
As of June 30, 2026, we had federal net operating loss carryforwards of approximately $304.9 million, state net operating loss carryforwards of approximately $309.1 million, and capital loss carryforwards of approximately $2.5 million which will be available to offset future income. In regard to the federal net operating loss carryforwards, $9.0 million will expire between 2030 and 2034 and are subject to an annual IRC Section 382 limitation which restricts their utilization against taxable income in future periods, while the remaining balance of approximately $294.0 million does not expire and carries forward indefinitely. Of our total state net operating loss carryforwards, approximately $192.5 million will expire between 2028 and 2045, while the remaining balance of approximately $116.6 million does not expire and carries forward indefinitely. The capital loss carryforwards will expire in 2030. In addition, we have federal business tax credits of approximately $1.6 million that can be carried forward indefinitely and we have state business tax credits of approximately $24.4 million that can be carried forward indefinitely.
As of June 30, 2026 and December 31, 2025, we had a liability of $12.4 million and $11.4 million, respectively, for unrecognized tax benefits related to various federal and state income tax matters excluding interest, penalties and related tax benefits. The reconciliation of the beginning unrecognized tax benefits balance to the ending balance is as follows:
Six Months Ended June 30,
20262025
(In thousands)
Beginning balance$11,423 $12,541 
Increases related to positions taken during the current year966 1,164 
Ending balance$12,389 $13,705 
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate $12,001 $13,135 
As of June 30, 2026 and 2025, we recognized accrued interest and penalties related to unrecognized tax benefits of approximately $1.4 million and $2.0 million, respectively.