Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes [Abstract]

Income Taxes

Note 15—Income Taxes

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

	Year Ended December 31,
(Dollars in thousands)	2022		2021			2020
Income tax expense / (benefit)
Current:
Federal	$	10,638	$	12,595		$	12,174
State		9,683		10,270			9,005
Total current expense		20,321		22,865			21,179
Deferred:
Federal		3,744		59			(1,115	)
State		586		(939	)		(847	)
Total current deferred benefit		4,330		(880	)		(1,962	)
Provision for income tax expense	$	24,651	$	21,985		$	19,217

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,
	2022						2021						2020
(Dollars in thousands)	Amount			Rate			Amount			Rate			Amount			Rate
Effective income tax rate
Federal statutory rate	$	20,946			21.00	%	$	18,548			21.00	%	$	16,370			21.00	%
State taxes, net of Federal income tax benefit		8,112			8.13	%		7,370			8.34	%		6,445			8.27	%
Low-income housing tax credits		(3,031	)		(3.04	%)		(3,116	)		(3.53	%)		(2,655	)		(3.41	%)
Compensation expense		(578	)		(0.58	%)		-			-			-			-
Bank owned life insurance		(494	)		(0.49	%)		(471	)		(0.53	%)		(444	)		(0.57	%)
Tax-exempt interest income		(326	)		(0.32	%)		(347	)		(0.39	%)		(350	)		(0.45	%)
Other, net		22			0.02	%		1			0.00	%		(149	)		(0.19	%)
Total provision for income tax expense and effective tax rate	$	24,651			24.72	%	$	21,985			24.89	%	$	19,217			24.65	%

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

	December 31,
(Dollars in thousands)	2022			2021
Deferred income tax assets:
Allowance for credit losses	$	20,508		$	18,129
Deferred compensation		20,564			15,339
Unrealized losses on debt securities		9,341			945
Accrued liabilities		3,832			9,415
State income taxes		2,034			2,157
Lease liabilities		1,027			1,222
SBA PPP loan fee income		-			764
Acquired net operating losses		584			614
Low-income housing tax investments		565			503
Acquired loans fair valuation		108			197
Acquired OREO fair valuation		108			108
Other		2			19
Total deferred income tax assets		58,673			49,412
Deferred income tax liabilities:
Commercial leasing	$	(21,204	)	$	(17,892	)
Premises and equipment		(1,940	)		(1,860	)
Deferred loan and lease costs		(1,105	)		(869	)
Right of use leasing asset		(996	)		(1,197	)
Core deposit intangible asset		(830	)		(1,006	)
Accretion on investment securities		(547	)		(523	)
FHLB dividends		(348	)		(348	)
Prepaid assets		(40	)		(43	)
Other		(156	)		(132	)
Total deferred income tax liabilities		(27,166	)		(23,870	)
Net deferred income tax assets	$	31,507		$	25,542

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, 2022 and 2021.

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, 2022 and 2021, 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 2018 through 2022 tax years remain subject to selection for examination as of December 31, 2022. As of December 31, 2022 and 2021, the Company has net operating loss of $1.9 million and $2.0 million carry-forwards and no tax credit carry-forwards.