Income Taxes

12 Months Ended

Dec. 31, 2024

Income Taxes

Income Taxes

15. Income Taxes

The significant components of the income tax provision are as follows (in thousands).

	Year Ended December 31,
	2024		2023		2022
Current:
Federal	$	48,686	$	19,681	$	24,951
State		1,896		4,455		3,698
		50,582		24,136		28,649
Deferred:
Federal	$	(16,262)	$	6,131	$	7,377
State		(3,273)		873		807
		(19,535)		7,004		8,184
	$	31,047	$	31,140	$	36,833

The income tax provision differs from the amount that would be computed by applying the statutory federal income tax rate to income before income taxes as a result of the following (in thousands). The applicable corporate federal income tax rate was 21% for all periods presented.

	Year Ended December 31,
	2024		2023		2022
Computed tax at federal statutory rate	$	32,394	$	31,315	$	32,787
Tax effect of:
Nondeductible expenses		2,325		1,953		1,290
Compensation limitation		1,881		2,918		4,106
State income taxes		1,809		1,466		3,559
Tax-exempt income, net		(2,225)		(2,390)		(1,620)
Minority interest		(2,099)		(1,721)		(1,294)
Other		(3,038)		(2,401)		(1,995)
	$	31,047	$	31,140	$	36,833

The components of the tax effects of temporary differences that give rise to the net deferred tax asset included in other assets within the consolidated balance sheets are as follows (in thousands).

	December 31,
	2024		2023
Deferred tax assets:
Net operating loss carryforward	$	903	$	406
Purchase accounting adjustment - loans		3,629		4,751
Allowance for credit losses		23,881		26,711
Compensation and benefits		13,300		15,029
Legal and other reserves		3,467		4,116
Net unrealized losses on securities and other investments		32,939		36,332
Operating lease liabilities		24,932		25,811
Other		2,569		5,473
		105,620		118,629
Deferred tax liabilities:
Premises and equipment		9,551		14,143
Intangible assets		1,504		1,946
Derivatives		612		1,801
Loan servicing		1,180		23,100
Operating lease ROU assets		20,701		21,079
Deferred loan fees		7,416		6,655
Other		1,327		3,097
		42,291		71,821
Net deferred tax asset	$	63,329	$	46,808

The Company’s effective tax rate was 20.1%, 20.9% and 23.6% during 2024, 2023 and 2022, respectively. The effective tax rate for 2024 was lower than the applicable statutory rate due to investments in tax-exempt instruments, state refund claims and return to provision activity, partially offset by the impact of nondeductible expenses, nondeductible compensation expense and other permanent adjustments. The effective tax rate for 2023 was lower than the applicable statutory rate due to the impacts of excess tax benefits on share-based payment awards, investments in tax-exempt instruments and changes in accumulated tax reserves, partially offset by nondeductible expenses and the booking of additional taxes from a recent change in the source of funding for an acquired non-qualified, deferred compensation plan, while 2022 approximated statutory rates and included the effect of investments in tax-exempt instruments, offset by nondeductible expenses.

At December 31, 2024 and 2023, the Company had net operating loss carryforwards for state income tax purposes of $0.9 million and $0.4 million, respectively, on a tax effected basis at applicable rates for respective tax years. These net operating loss carryforwards expire in 2037 and later years. The net operating loss carryforwards are expected to be fully

realized prior to any expiration. Further, at December 31, 2024 and 2023, the Company had no net operating loss carryforwards for federal income tax purposes. At December 31, 2023, the Company had fully recognized built-in loss (“RBIL”) amounts arising from the ownership change resulting from the acquisition of SWS Group, Inc. (“SWS Merger”). These RBILs were recognized during a five year recognition period and were fully realized prior to any expiration.

Based on the Company’s evaluation of its deferred tax assets, management determined that no valuation allowance against its gross deferred tax assets was necessary at December 31, 2024 or 2023.

GAAP requires the measurement of uncertain tax positions. Uncertain tax positions are the difference between a tax position taken, or expected to be taken, in a tax return and the benefit recognized for accounting purposes. At December 31, 2024 and 2023, the total amount of gross unrecognized tax benefits was $2.4 million and $2.9 million, respectively, of which $1.9 million and $2.3 million, respectively, if recognized, would favorably impact the Company’s effective tax rate.

The aggregate changes in gross unrecognized tax benefits, which excludes interest and penalties, are as follows (in thousands).

	Year Ended December 31,
	2024		2023		2022
Balance, beginning of year	$	2,884	$	5,273	$	4,869
Decreases related to tax positions taken during a prior year		(46)		(1,719)		(767)
Increases related to tax positions taken during the current year		221		266		2,077
Decreases related to expiration of the statute of limitations		(664)		(936)		(906)
Balance, end of year	$	2,395	$	2,884	$	5,273

Specific positions that may be resolved include issues involving apportionment and tax credits. At December 31, 2024, the unrecognized tax benefit is a component of taxes receivable, which is included in other assets within the consolidated balance sheet.

The Company files income tax returns in U.S. federal and numerous state jurisdictions. The Company is subject to tax examinations in numerous jurisdictions in the United States until the applicable statute of limitations expires. The Company is no longer subject to U.S. federal tax examinations for tax years prior to 2021. The Company is open for various state tax examinations for tax years 2020 and later.