Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income tax expense for the years ended December 31, 2022, 2021, and 2020 are as follows:

($ in thousands)		2022		2021	2020
Current	- Federal	$	35,616	25,742	27,799
	- State	4,477		3,733	3,909
Deferred	- Federal	(1,658)		(4,247)	(8,893)
	- State	(152)		(553)	(1,161)
Total		$	38,283	24,675	21,654

The following is a reconciliation of federal income tax expense at the statutory rate of 21% at December 31, 2022, December 31, 2021, and December 31, 2020, to the income tax provision reported in the financial statements.

($ in thousands)	2022		2021	2020
Tax provision at statutory rate	$	38,896	25,266	21,657
Increase (decrease) in income taxes resulting from:
Tax-exempt interest income	(1,976)		(1,589)	(1,050)
Low income housing and other tax credits	(669)		(1,229)	(772)
Bank-owned life insurance income	(1,511)		(589)	(532)
Non-deductible interest expense	26		14	23
State income taxes, net of federal benefit	3,369		2,472	2,117
Nondeductible merger expenses	107		242	—
Change in valuation allowance	(20)		(10)	(20)
Other, net	61		98	231
Total	$	38,283	24,675	21,654

The sources and tax effects of temporary differences that give rise to significant portions of the deferred tax assets, which are included in Other Assets on the consolidated balance sheets, are as follows at December 31, 2022 and 2021:

($ in thousands)	2022		2021
Deferred tax assets:
Allowance for credit losses on loans	$	20,900	18,102
Allowance for credit losses on unfunded commitments	3,057		3,103
Excess book over tax pension plan cost	365		467
Deferred compensation	638		571
Federal & state net operating loss and tax credit carryforwards	197		206
Accruals, book versus tax	4,404		4,235
Pension	—		81
Unrealized losses on securities available for sale	102,046		7,369
Foreclosed real estate	3		20
Basis differences in assets acquired in FDIC transactions	—		504
Purchase accounting adjustments	2,982		4,076
Equity compensation	768		694
Partnership investments	652		310
Leases	151		108
SBA servicing asset	77		108
All other	—		101
Gross deferred tax assets	136,240		40,055
Less: Valuation allowance	(30)		(10)
Net deferred tax assets	136,210		40,045
Deferred tax liabilities:
Loan fees	(3,102)		(2,840)
Depreciable basis of fixed assets	(5,493)		(5,790)
Amortizable basis of intangible assets	(10,047)		(10,328)
Basis differences in assets acquired in FDIC transactions	(108)		—
Trust preferred securities	(416)		(453)
Pension	(12)		—
Gross deferred tax liabilities	(19,178)		(19,411)
Net deferred tax asset	$	117,032	20,634

The valuation allowances for 2022, 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 2019. There are no indications of any material adjustments relating to any examination currently being conducted by any taxing authority.

Retained earnings at December 31, 2022, 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.