Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 12—Income Taxes

The following were the components of provision for income taxes for the years ended December 31, 2021, 2020, and 2019:

	2021			2020			2019
Current tax expense:
Federal	$	21,605		$	21,286		$	18,976
State and local		9,882			2,015			2,199
Total current tax expense		31,487			23,301			21,175
Deferred tax expense (benefit):
Federal		2,966			(10,713	)		(3,676	)
State and local		(3,026	)		1,612			2,794
Total deferred tax benefit		(60	)		(9,101	)		(882	)
Provision for income taxes	$	31,427		$	14,200		$	20,293

The following is a reconciliation between the statutory U.S. federal income tax rate of 21% for 2021, 2020 and 2019, and the effective tax rate:

	2021				2020				2019
Calculated tax expense at statutory rate		21.0		%		21.0		%		21.0		%
Increase (decrease) in income taxes resulting from:
State taxes, net of federal income tax		5.4				7.3				5.6
Tax exempt income		(0.9	)			(1.3	)			(0.5	)
Share-based compensation		(0.2	)			0.3				(0.1	)
Non-deductible expenses		—				0.2				0.3
Total income tax expense		25.3		%		27.5		%		26.3		%

Net deferred tax assets increased to $50.3 million at December 31, 2021 compared to $40.2 million at December 31, 2020.

Note 12—Income Taxes (continued)

The following were the significant components of the deferred tax assets and liabilities as of December 31, 2021 and 2020:

	2021			2020
Deferred tax assets:
Net operating losses and tax credits	$	22,338		$	21,510
Interest on non-accrual loans		2,651			2,250
Allowance for loan and lease losses and loan basis		17,570			25,714
Servicing assets		2,970			4,001
Deposits		—			20
Premises and equipment		1,837			—
Other real estate owned		329			433
Net unrealized holding losses on cash flow hedges		—			117
Net unrealized holding loss on securities available-for-sale		3,239			—
Accrued expenses		4,816			3,877
Other		4,502			1,937
Total deferred tax assets		60,252			59,859
Deferred tax liabilities:
Premises and equipment		—			(375	)
Core deposit intangibles		(4,668	)		(6,760	)
Trust preferred securities		(2,196	)		(2,380	)
Net unrealized holding gain on securities available-for-sale		—			(8,015	)
Net unrealized holding gain on cash flow hedges		(1,049	)		—
Other		(2,010	)		(2,148	)
Total deferred tax liabilities		(9,923	)		(19,678	)
Net deferred tax assets	$	50,329		$	40,181

	2021		2020
NOL carryforwards available to offset future taxable income:
Federal gross NOL carryforwards - begin to expire in 2030	$	9,072	$	9,828
Federal gross NOL carryforwards - with no expiration		2,216		2,997
Illinois gross NLD carryforwards - begin to expire in 2031		266,061		250,723

Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual use of net operating loss (“NOL”) and credit carryforwards may be limited in the event a cumulative change in ownership of more than 50 percent occurs within a three‑year period. The Company has determined that such an ownership change occurred as of June 28, 2013 as a result of our recapitalization. This ownership change resulted in estimated annual limitations on the utilization of tax attributes, including net operating loss carryforwards. Approximately $756,000 of the restricted Federal net operating losses will become available each year related to Federal net operating losses generated prior to the 2013 recapitalization. In connection with the Company’s acquisition of Oak Park River Forest, the Company acquired $4.3 million of additional Federal net operating losses that are subject to an annual Section 382 limitation of approximately $781,000. These Federal net operating losses acquired in connection with the Oak Park River Forest acquisition have no expiration.

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company has evaluated the impact of the CARES Act and determined that none of the changes would result in a material income tax benefit to the Company.

During the second quarter 2021, Illinois Senate Bill 2017 was passed which created a temporary limitation on Net Loss Deduction ("NLD") usage. For tax years 2021, 2022, and 2023, C Corporations are limited to applying a maximum of $100,000 of NLD to taxable income. NLDs that are limited during these years have an extended expiration date for the years in which they are limited. The extended expiration of the Company’s NLD carryforwards are from December 31, 2031 to December 31, 2038.

The Company and the Bank file consolidated income tax returns. The Company and the Bank are no longer subject to United States federal income tax examinations for years before 2018 and state income tax examinations for years before 2017.