Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income tax expense for the years ended December 31, 2021, 2020, and 2019 are as follows:

($ in thousands)		2021		2020	2019
Current	- Federal	$	25,742	27,799	19,920
	- State	3,733		3,909	2,499
Deferred	- Federal	(4,247)		(8,893)	1,572
	- State	(553)		(1,161)	239
Total		$	24,675	21,654	24,230

The sources and tax effects of temporary differences that give rise to significant portions of the deferred tax assets (liabilities) at December 31, 2021 and 2020 are presented below:

($ in thousands)	2021		2020
Deferred tax assets:
Allowance for credit losses on loans	$	18,102	12,031
Allowance for credit losses on unfunded commitments	3,103		—
Excess book over tax pension plan cost	467		367
Deferred compensation	571		257
Federal & state net operating loss and tax credit carryforwards	206		282
Accruals, book versus tax	4,235		3,232
Pension	81		418
Unrealized losses on securities available for sale	7,369		—
Foreclosed real estate	20		123
Basis differences in assets acquired in FDIC transactions	504		647
Purchase accounting adjustments	4,076		—
Equity compensation	694		661
Partnership investments	310		258
Leases	108		120
SBA servicing asset	108		358
All other	101		3
Gross deferred tax assets	40,055		18,757
Less: Valuation allowance	(10)		(14)
Net deferred tax assets	40,045		18,743
Deferred tax liabilities:
Loan fees	(2,840)		(1,011)
Depreciable basis of fixed assets	(5,790)		(4,809)
Amortizable basis of intangible assets	(10,328)		(7,965)
FHLB stock dividends	—		(236)
Trust preferred securities	(453)		(473)
Unrealized gain on securities available for sale	—		(4,699)
Gross deferred tax liabilities	(19,411)		(19,193)
Net deferred tax asset (liability) - included in other assets (liabilities)	$	20,634	(450)

The valuation allowances for 2021 and 2020 related primarily to state net operating loss carryforwards. It is management’s belief that the realization of the remaining net deferred tax assets is more likely than not.

The Company had no significant uncertain tax positions, and thus no reserve for uncertain tax positions has been recorded. Additionally, the Company determined that it has no material unrecognized tax benefits that if recognized would affect the effective tax rate. The Company’s general policy is to record tax penalties and interest as a component of “other operating expenses.”

The Company is subject to routine audits of its tax returns by the Internal Revenue Service and various state taxing authorities.  The Company’s tax returns are subject to income tax audit by federal and state agencies beginning with the year 2018. There are no indications of any material adjustments relating to any examination currently being conducted by any taxing authority.

Retained earnings at December 31, 2021 and 2020 included approximately $6.9 million representing pre-1988 tax bad debt reserve base year amounts for which no deferred income tax liability has been provided since these reserves are not expected to reverse or may never reverse. Circumstances that would require an accrual of a portion or all of this unrecorded tax liability are a reduction in qualifying loan levels relative to the end of 1987, failure to meet the definition of a bank, dividend payments in excess of accumulated tax earnings and profits, or other distributions in dissolution, liquidation or redemption of the Bank’s stock.

The following is a reconcilement of federal income tax expense at the statutory rate of 21% at December 31, 2021 and December 31, 2020 and December 31, 2019, to the income tax provision reported in the financial statements.

($ in thousands)	2021		2020	2019
Tax provision at statutory rate	$	25,266	21,657	24,418
Increase (decrease) in income taxes resulting from:
Tax-exempt interest income	(1,589)		(1,050)	(1,186)
Low income housing tax credits	(1,229)		(772)	(756)
Bank-owned life insurance income	(589)		(532)	(538)
Non-deductible interest expense	14		23	43
State income taxes, net of federal benefit	2,472		2,117	2,178
Nondeductible merger expenses	242		—	—
Change in valuation allowance	(10)		(20)	4
Impact of tax reform	—		—	(73)
Other, net	98		231	140
Total	$	24,675	21,654	24,230