INCOME TAXES

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

16. INCOME TAXES

The Company files income tax returns in the U.S., the Commonwealth of Virginia, and other states. With few exceptions, the Company is no longer subject to U.S. federal or state income tax examinations by tax authorities for years prior to 2021.

Significant components of the Company’s net deferred tax assets and liabilities consist of the following as of December 31, (dollars in thousands):

	2024		2023
Deferred tax assets:
AFS securities	$	87,641	$	81,507
ACL		42,393		32,505
Loan Fair Value Marks		27,623		2,725
Net operating loss ("NOL") carryforwards		20,399		28,113
Lease liabilities		18,404		18,283
Cash flow hedges		11,671		11,422
Employee compensation and benefit plans		8,556		8,935
Other		9,873		7,970
Total deferred tax assets, gross		226,560		191,460
Less: valuation allowance		(4,419)		—
Total deferred tax assets, net		222,141		191,460
Deferred tax liabilities:
Premises and equipment		75,701		59,561
Intangibles		20,233		6,037
Lease ROU asset		16,922		16,427
Other		6,354		4,751
Total deferred tax liabilities		119,210		86,776
Net deferred tax assets	$	102,931	$	104,684

In assessing the ability to realize deferred tax assets, the Company considers the scheduled reversal of temporary differences, projected future taxable income, and tax planning strategies in accordance with ASC 740-10-30, Income Taxes – Initial Measurement. As of each reporting date, the Company considers existing evidence, both positive and negative, that could impact the Company’s view with regard to future realization of deferred tax assets. The Bank is subject to a bank franchise tax but not a state income tax in Virginia, its primary place of business. The Company, its subsidiaries, and the Bank’s non-bank subsidiaries are subject to Virginia income taxes and may be able to utilize existing state deferred tax assets, depending on a number of factors including those entities’ financial results. During 2024, the Company reviewed its business plan considering the American National acquisition and other business changes and noted shifts within the state income tax footprint and other factors that impacted projected future realization of state deferred tax items, including those attributable to operations in Virginia. As a result, the Company concluded it is more likely than not that the benefit for certain state net operating loss carryforwards will not be realized, and the Company recorded a valuation allowance via a non-cash charge to income tax expense. The valuation allowance totaled $4.4 million and $0 at December 31, 2024 and 2023, respectively.

The NOL carryforwards at December 31, were as follows (dollars in thousands):

			Expiration
	2024		Year
NOL carryforwards – federal (1) (2)	$	45,601		2031-2037
NOL carryforwards – federal (1)		17,582		N/A
NOL carryforwards – North Carolina (3)		70,216		2028-2030
NOL carryforwards – Virginia (4)		44,745		N/A

N/A – not applicable as the NOL can be carried forward indefinitely

⁽¹⁾ The Company acquired a portion of these carryforwards and will be subject to limitations that could limit the

Company’s utilization in future periods.

⁽²⁾ Balance includes recognized built in loss carryforwards that are subject to the same limitations as net operating loss

carryforwards.

⁽³⁾ Balance is pre-tax and includes the expected effect of the North Carolina rate reprice.

⁽⁴⁾ Balance is pre-tax, pre-apportionment, and net of the valuation allowance.

The Company analyzed the tax positions taken or expected to be taken in its tax returns for the periods ending December 31, 2024, 2023, and 2022, and had no liability related to uncertain tax positions in accordance with applicable ASC 740, Income Taxes.

The components of income tax expense (benefit) for the years ended December 31, were as follows (dollars in thousands):

	2024		2023		2022
Current income tax expense:
Federal	$	16,465	$	33,374	$	19,285
State		53		2,538		1,104
Total current income tax expense		16,518		35,912		20,389
Deferred tax expense (benefit):
Federal		24,720		3,646		25,145
State		9,425		(1,475)		(90)
Total deferred income tax expense (1)		34,145		2,171		25,055
Total income tax expense	$	50,663	$	38,083	$	45,444

⁽¹⁾ Does not reflect the deferred tax effects of unrealized gains and losses on AFS securities, unrealized gains and losses

for AFS securities transferred to HTM, unrealized gains and losses on BOLI or changes in fair values of cash flow hedges that are included in Accumulated Other Comprehensive (Loss) Income. Refer to Note 12 “Stockholders’ Equity” in this Form 10-K for additional information.

Income tax expense for 2024, 2023, and 2022 varies from the amount computed by applying the statutory U.S. federal income tax rate to income before income taxes. A reconciliation between the expected and actual income tax expense, and resulting effective tax rate, is presented in the following table for the years ended December 31, (dollars in thousands):

	2024		2023		2022
Expected federal income tax expense	$	54,557	$	50,361	$	58,790
Increase (decrease) in taxes resulting from:
State income tax expense (benefit), net of federal effect		9,446		530		782
Tax-exempt income, net of expense disallowance		(11,104)		(11,123)		(11,615)
Bank owned life insurance		(3,282)		(2,469)		(2,415)
Other, net		1,046		784		(98)
Total income tax expense	$	50,663	$	38,083	$	45,444
Effective income tax rate		19.5%		15.9%		16.2%

For the years ended December 31, 2024, 2023, and 2022 investment tax credits totaled approximately $9.3 million, $4.8 million, and $4.0 million, respectively.