Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income tax expense for the years ended December 31, were calculated using the asset and liability method as follows:

(Dollars in thousands)	2024		2023		2022
Current expense:
Federal	$	9,185	$	10,424	$	11,996
State	3,821		4,763		4,606
Total current expense	13,006		15,187		16,602
Deferred benefit:
Federal	71		(1,425)		(2,027)
State	(184)		(575)		(1,145)
Total deferred benefit	(113)		(2,000)		(3,172)
Total income tax expense	$	12,893	$	13,187	$	13,430

The provision for income taxes differs from the amount computed by applying the statutory U.S. federal income tax rate of 21% for 2024, 2023 and 2022 to income before taxes as follows: 

(Dollars in thousands)	2024			2023			2022
Computed income tax expense at statutory rate	$	10,842		$	10,761		$	11,791
State income taxes, net of federal tax benefit	2,873			3,309			2,734
Tax-exempt income, net of disallowance	(680)			(758)			(804)
Bank-owned life insurance income, net	(420)			(265)			(252)
Tax expense (benefit) from stock compensation	60			(108)			(147)
New market tax credit	(135)			(135)			—
Other	353			383			108
Total income tax expense	$	12,893		$	13,187		$	13,430
Effective income tax rate	25.0		%	25.7		%	23.9		%

At December 31, the tax effects of each type of income and expense item that give rise to deferred taxes are as follows: 

(Dollars in thousands)	2024		2023
Deferred tax asset:
Allowance for credit losses	$	18,826	$	18,278
Depreciation	3,678		3,524
Net unrealized losses on equity securities	—		51
Net unrealized losses on debt securities	22,922		23,105
Supplemental employee retirement plans	269		330
Deferred compensation and benefits	3,926		3,976
Non-accrual interest	1,800		1,608
Stock-based compensation expense	823		878
Lease liability	6,614		6,757
Other	101		6
Total	58,959		58,513
Deferred tax liability:
Goodwill	1,568		1,564
Net unrealized gains on equity securities	219		—
Deferred origination costs	1,238		848
Lease ROU asset	6,690		6,862
Other	148		73
Total	9,863		9,347
Net deferred tax asset	$	49,096	$	49,166

Management believes based upon positive historical and expected future earnings that it is more likely than not the Company will generate sufficient taxable income to realize the deferred tax asset existing at December 31, 2024. However, factors beyond management's control, such as the general state of the economy, can affect future levels of taxable income and there can be no assurances that sufficient taxable income will be generated to fully realize the deferred tax assets in the future. 

The Company paid total estimated income taxes during the years ended December 31, 2024, 2023 and 2022 of $13.5 million, $15.6 million and $17.0 million, respectively.

The Company had no unrecognized tax benefits accrued as income tax liabilities or receivables or as deferred tax items at December 31, 2024, or December 31, 2023. The Company is generally subject to examinations by taxing authorities for the prior three tax years.

The Company invests in qualified affordable housing projects as a limited partner. As of December 31, 2024, and December 31, 2023, the Company recognized no Federal Low Income Housing tax credits. As of December 31, 2024 the Company had no remaining tax credits related to these Federal Low Income Housing Tax Credit program to be realized. For the year ended December 31, 2022, the Company recognized $36 thousand in Federal Low Income Housing tax credits.

In March 2023, the Bank made an equity contribution to its wholly owned subsidiary, the NMTC Investment Fund, in order to invest in a local NMTC project. The Bank invested $3.7 million in the Investment Fund and anticipates receiving $4.8 million of federal tax credits over seven years. The investment is accounted for using the proportional amortization method and will be amortized over seven years, which represents the period that the tax credits and other tax benefits will be utilized. The investment is carried within the line "Prepaid expenses and other assets" on the Company's Consolidated Balance Sheet and the investment amortization expense and tax credits are presented on a net basis within the line "Provision for income taxes" on the Company's Consolidated Statements of Income. During the year ended December 31, 2024, the related amortization expense amounted to $478 thousand and the related tax credits amounted to $613 thousand.