Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income taxes for the years ended December 31, 2023, 2022 and 2021 are summarized as follows:

	December 31,
(in thousands)	2023		2022		2021
Current:
Federal tax expense	$	2,438	$	7,204	$	12,675
State tax expense	1,866		4,232		5,549
Deferred:
Deferred income tax expense	(330)		4,326		1,768
Total income tax provision	$	3,974	$	15,762	$	19,992

Income tax expense (benefit) based on statutory rate for the year ended December 31, 2023, 2022 and 2021 varied from the amount computed by applying the maximum effective federal income tax rate of 21%, to the income before income taxes, because of the following items:

	Year ended December 31,
	2023				2022				2021
(dollars in thousands)	Amount		% of Pretax Income		Amount		% of Pretax Income		Amount		% of Pretax Income
Income tax based on statutory rate	$	5,215	21.0	%	$	16,085	21.0	%	$	18,790	21.0	%
Tax-exempt interest	(2,391)		(9.6)		(3,505)		(4.6)		(3,500)		(3.9)
Bank-owned life insurance	(525)		(2.1)		(484)		(0.6)		(451)		(0.5)
State income taxes, net of federal income tax benefit	1,476		5.9		3,805		5.0		4,624		5.2
Bargain purchase gain	—		—		(792)		(1.0)		—		—
Non-deductible acquisition expenses	36		0.2		55		0.1		41		—
General business credits	(40)		(0.2)		(60)		(0.1)		22		—
State tax reduction	—		—		835		1.1		—		—
Other	203		0.8		(177)		(0.3)		466		0.5
Total income tax expense	$	3,974	16.0	%	$	15,762	20.6	%	$	19,992	22.3	%

Net deferred tax assets as of December 31, 2023 and December 31, 2022 consisted of the following components:

	December 31,
(in thousands)	2023		2022
Deferred income tax assets:
Allowance for credit losses	$	14,232	$	13,693
Deferred compensation	3,441		3,299
Net operating losses (state and federal)	8,407		7,707
Unrealized losses on investment securities	22,172		30,355
Accrued compensation	1,189		1,565
ROU liabilities	781		852
Other	1,975		2,474
Gross deferred tax assets	52,197		59,945
Deferred income tax liabilities:
Premises and equipment depreciation and amortization	5,272		5,020
Purchase accounting adjustments	2,674		3,220
Mortgage servicing rights	3,382		3,403
ROU assets	754		804
Other	756		1,237
Gross deferred tax liabilities	12,838		13,684
Net deferred income tax asset	39,359		46,261
Valuation allowance	8,141		7,190
Net deferred tax asset	$	31,218	$	39,071

The Company has recorded a deferred tax asset for the future tax benefits of Iowa net operating loss carryforwards. The Iowa net operating loss carryforwards amounting to approximately $74.1 million will expire in various amounts from 2024 to 2044. As of December 31, 2023 and 2022, the Company believed it was more likely than not that all temporary differences associated with the Iowa corporate tax return would not be fully realized. Accordingly, the Company has recorded a valuation allowance to reduce the net operating loss carryforward and the temporary differences associated with the Iowa corporate income tax return. A valuation allowance related to the remaining deferred tax assets has not been provided because management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.

The Company had no material unrecognized tax benefits as of December 31, 2023 and December 31, 2022.