Income Taxes

12 Months Ended

Dec. 31, 2024

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)	2024		2023			2022
Income tax expense (benefit)
Current:
Federal	$	14,196	$	23,025		$	10,638
State		8,574		10,817			9,683
Total current income tax expense		22,770		33,842			20,321
Deferred:
Federal		7,284		(6,546	)		3,744
State		3,733		943			586
Total deferred income tax expense (benefit)		11,017		(5,603	)		4,330
Total provision for income tax expense	$	33,787	$	28,239		$	24,651

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,
	2024						2023						2022
(Dollars in thousands)	Amount			Rate			Amount			Rate			Amount			Rate
Effective income tax rate
Federal statutory rate	$	25,671			21.00	%	$	24,476			21.00	%	$	20,946			21.00	%
State taxes, net of federal income tax benefit		9,730			7.96	%		9,290			7.97	%		8,112			8.13	%
Low-income housing tax credits		(608	)		(0.50	%)		(3,528	)		(3.03	%)		(3,031	)		(3.04	%)
Compensation expense		(137	)		(0.11	%)		(267	)		(0.23	%)		(578	)		(0.58	%)
Bank-owned life insurance		(521	)		(0.43	%)		(1,338	)		(1.15	%)		(494	)		(0.49	%)
Tax-exempt interest income		(512	)		(0.42	%)		(470	)		(0.40	%)		(326	)		(0.32	%)
Other, net		164			0.14	%		76			0.07	%		22			0.02	%
Total income tax expense and effective tax rate	$	33,787			27.64	%	$	28,239			24.23	%	$	24,651			24.72	%

The components of net deferred tax assets and liabilities at the periods shown are summarized as follows:

	December 31,
(Dollars in thousands)	2024			2023
Deferred tax assets:
Allowance for credit losses	$	23,185		$	23,386
Deferred compensation		23,849			21,562
Unrealized losses on debt securities		8,250			5,377
Accrued liabilities		3,685			3,986
Tax credit carry forward		2,402			2,911
State income taxes		1,793			2,271
Lease liabilities		692			838
Acquired net operating losses		476			506
Low-income housing tax investments		-			447
Acquired loans fair valuation		80			89
Acquired OREO fair valuation		108			108
Other		-			2
Total deferred tax assets		64,520			61,483
Deferred tax liabilities:
Commercial leasing	$	(25,704	)	$	(16,017	)
Premises and equipment		(2,034	)		(1,740	)
Deferred loan and lease costs		(936	)		(1,000	)
Right of use leasing asset		(659	)		(802	)
Core deposit intangible asset		(499	)		(661	)
Accretion on investment securities		(1,200	)		(659	)
FHLB dividends		(348	)		(348	)
Investments		(225	)		(225	)
Prepaid assets		(17	)		(52	)
Total deferred tax liabilities		(31,622	)		(21,504	)
Net deferred tax assets	$	32,898		$	39,979

The Company believes, based on available information, that more likely than not, the net deferred tax asset will be realized in the normal course of operations. Accordingly, no valuation allowance has been recorded at December 31, 2024 and 2023. The decrease in net deferred tax assets of $7.0 million was primarily due to sale of investment tax credits related to commercial leasing activities of $7.4 million.

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, 2024 and 2023, 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 2020 through 2024 tax years remain subject to selection for examination as of December 31, 2024. As of December 31, 2024 and 2023, the Company had net operating loss carryovers of $1.6 million and $1.7 million, respectively. The Company had $2.4 million and $2.9 million in tax credit carry-forwards as of December 31, 2024 and December 31, 2023, respectively.