Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes [Abstract]

Income Taxes

Note 14—Income Taxes

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

	Year Ended December 31,
(Dollars in thousands)	2023			2022		2021
Income tax expense / (benefit)
Current:
Federal	$	23,025		$	10,638	$	12,595
State		10,817			9,683		10,270
Total current expense		33,842			20,321		22,865
Deferred:
Federal		(6,546	)		3,744		59
State		943			586		(939	)
Total current deferred benefit		(5,603	)		4,330		(880	)
Provision for income tax expense	$	28,239		$	24,651	$	21,985

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,
	2023						2022						2021
(Dollars in thousands)	Amount			Rate			Amount			Rate			Amount			Rate
Effective income tax rate
Federal statutory rate	$	24,476			21.00	%	$	20,946			21.00	%	$	18,548			21.00	%
State taxes, net of Federal income tax benefit		9,290			7.97	%		8,112			8.13	%		7,370			8.34	%
Low-income housing tax credits		(3,528	)		(3.03	%)		(3,031	)		(3.04	%)		(3,116	)		(3.53	%)
Compensation expense		(267	)		(0.23	%)		(578	)		(0.58	%)		-			-
Bank owned life insurance		(1,338	)		(1.15	%)		(494	)		(0.49	%)		(471	)		(0.53	%)
Tax-exempt interest income		(470	)		(0.40	%)		(326	)		(0.32	%)		(347	)		(0.39	%)
Other, net		76			0.07	%		22			0.02	%		1			0.00	%
Total provision for income tax expense and effective tax rate	$	28,239			24.23	%	$	24,651			24.72	%	$	21,985			24.89	%

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

	December 31,
(Dollars in thousands)	2023			2022
Deferred income tax assets:
Allowance for credit losses	$	23,386		$	20,508
Deferred compensation		21,562			20,564
Unrealized losses on debt securities		5,377			9,341
Accrued liabilities		3,986			3,832
Tax credit carry forward		2,911			-
State income taxes		2,271			2,034
Lease liabilities		838			1,027
Acquired net operating losses		506			584
Low-income housing tax investments		447			565
Acquired loans fair valuation		89			108
Acquired OREO fair valuation		108			108
Other		2			2
Total deferred income tax assets		61,483			58,673
Deferred income tax liabilities:
Commercial leasing	$	(16,017	)	$	(21,204	)
Premises and equipment		(1,740	)		(1,940	)
Deferred loan and lease costs		(1,000	)		(1,105	)
Right of use leasing asset		(802	)		(996	)
Core deposit intangible asset		(661	)		(830	)
Accretion on investment securities		(659	)		(547	)
FHLB dividends		(348	)		(348	)
Other		(225	)		(156	)
Prepaid assets		(52	)		(40	)
Total deferred income tax liabilities		(21,504	)		(27,166	)
Net deferred income tax assets	$	39,979		$	31,507

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, 2023 and 2022. The increase in net deferred income tax assets of $8.5 million was primarily due to $2.9 million in tax credit carry-forwards and a $5.2 million decrease in deferred income tax liabilities related to our commercial leasing business.

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, 2023 and 2022, 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 2019 through 2023 tax years remain subject to selection for examination as of December 31, 2023. As of December 31, 2023 and 2022, the Company had net operating loss carryovers of $1.7 million and $1.9 million, respectively. The Company had $2.9 million in tax credit carry-forwards as of December 31, 2023, and no tax carry-forward as of December 31, 2022.