Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes [Abstract]

Income Taxes

Note 16 — Income Taxes

The components of income tax expense (benefit) are as follows:

	Year Ended December 31,
(Dollars in thousands)	2021			2020			2019
Income tax expense / (benefit)
Current:
Federal	$	12,595		$	12,174		$	14,798
State		10,270			9,005			7,733
Total current expense		22,865			21,179			22,531
Deferred:
Federal		59			(1,115	)		(3,500	)
State		(939	)		(847	)		246
Total current deferred benefit		(880	)		(1,962	)		(3,254	)
Provision for income tax expense	$	21,985		$	19,217		$	19,277

The combined federal and state income tax expense differs from that computed at the federal statutory corporate tax rate as follows:

	Year Ended December 31,
	2021						2020						2019
(Dollars in thousands)	Amount			Rate			Amount			Rate			Amount			Rate
Effective income tax rate
Federal statutory rate	$	18,548			21.00	%	$	16,370			21.00	%	$	15,816			21.00	%
State taxes, net of Federal income tax benefit		7,370			8.34	%		6,445			8.27	%		6,304			8.40	%
Low-income housing tax credits		(3,116	)		(3.53	%)		(2,655	)		(3.41	%)		(2,078	)		(2.80	%)
Bank owned life insurance		(471	)		(0.53	%)		(444	)		(0.57	%)		(460	)		(0.60	%)
Tax-exempt interest income		(347	)		(0.39	%)		(350	)		(0.45	%)		(358	)		(0.50	%)
Other, net		1			(0.00	%)		(149	)		(0.19	%)		53			0.10	%
Total provision for income tax expense and effective tax rate	$	21,985			24.89	%	$	19,217			24.65	%	$	19,277			25.60	%

The nature and components of the Company’s net deferred income tax assets are as follows:

	December 31,
(Dollars in thousands)	2021			2020
Deferred income tax assets:
Allowance for credit losses	$	18,129		$	17,248
Deferred compensation		15,339			13,707
Accrued liabilities		9,415			8,526
State income taxes		2,157			1,891
Lease liabilities		1,222			1,454
Unrealized losses on debt securities		945			-
SBA PPP loan fee income		764			1,367
Acquired net operating losses		614			643
Low-income housing tax investments		503			384
Acquired loans fair valuation		197			237
Acquired OREO fair valuation		108			108
Other		19			7
Total deferred income tax assets		49,412			45,572
Deferred income tax liabilities:
Commercial leasing	$	(17,892	)	$	(17,183	)
Unrealized gains on debt securities		-			(5,156	)
Premises and equipment		(1,860	)		(1,684	)
Right of use leasing asset		(1,197	)		(1,428	)
Core deposit intangible asset		(1,006	)		(1,186	)
Deferred loan and lease costs		(869	)		(692	)
Accretion on investment securities		(523	)		(588	)
FHLB dividends		(348	)		(348	)
Prepaid assets		(43	)		(45	)
Other		(132	)		(169	)
Total deferred income tax liabilities		(23,870	)		(28,479	)
Net deferred income tax assets	$	25,542		$	17,093

The Company believes, based on available information, that more likely than not, the net deferred income tax asset will be realized in the normal course of operations. Accordingly, no valuation allowance has been recorded at December 31, 2021 and 2020.

The impact of a tax position is recognized in the financial statements if that position is more likely than not of being sustained on audit, based on the technical merits of the position. As of December 31, 2021 and 2020, the Company did not have any significant uncertain tax positions.  The Company includes any interest and penalties associated with unrecognized tax benefits within the provision for income taxes.  The Company does not expect a material change to the total amount of unrecognized tax benefits in the next twelve months.

The Company files U.S. and state income tax returns in jurisdictions with various statutes of limitations. The 2017 through 2021 tax years remain subject to selection for examination as of December 31, 2021. The Company’s California income tax returns for the years 2018, 2019 and 2020 are currently under audit. As of December 31, 2021 and 2020, the Company has net operating loss of $2.0 million and $2.1 million carry-forwards and no tax credit carry-forwards.