Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

(7) INCOME TAXES

The Company is subject to federal and applicable state corporate income taxes on its taxable ordinary income and capital gains. As a corporation taxed under Subchapter C of the Internal Revenue Code, the Company is able, and intends, to file a consolidated federal income tax return with corporate subsidiaries, in which it holds 80% or more of the outstanding equity interest measured by both vote and fair value.

The following table sets forth the significant components of the Company's deferred and other tax assets and liabilities as of September 30, 2023 and December 31, 2022.

(Dollars in thousands)	September 30, 2023			December 31, 2022
Goodwill and other intangibles	$	43,125		$	43,397
Provision for credit losses		(11,491	)		(9,945	)
Net operating loss carryforwards (1)		(3,804	)		(3,730	)
Accrued expenses, compensation, and other assets		(6,038	)		(3,819	)
Unrealized gains on other investments		(2,094	)		(1,445	)
Total deferred tax liability		19,698			24,458
Valuation allowance		3,433			2,295
Deferred tax liability, net	$	23,131		$	26,753

(1)As of September 30, 2023, the Company had an estimated $11.1 million of net operating loss carryforwards, $1.7 million of which expires at various dates between December 31, 2026 and December 31, 2035, which had a net carrying value of $0.4 million as of September 30, 2023.

The following table shows the components of the Company's tax provision for the three and nine months ended September 30, 2023 and 2022 as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
(Dollars in thousands)	2023			2022		2023		2022
Current
Federal	$	5,893		$	693	$	12,349	$	2,181
State		1,753			340		3,717		1,109
Deferred
Federal		(689	)		2,081		1,761		7,679
State		(230	)		91		755		1,923
Net provision for income taxes	$	6,727		$	3,205	$	18,582	$	12,892

The following table presents a reconciliation of statutory federal income tax provision to consolidated actual income tax provision reported for the three and nine months ended September 30, 2023 and 2022.

	Three Months Ended September 30,					Nine Months Ended September 30,
(Dollars in thousands)	2023		2022			2023			2022
Statutory Federal income tax provision at 21%	$	4,088	$	2,613		$	13,414		$	10,142
State and local income taxes, net of federal income tax		800		511			2,624			1,984
Non-deductible expenses		624		410			1,701			1,484
Deferred tax asset valuation allowance		1,138		—			1,138			—
Other		77		(329	)		(295	)		(718	)
Total income tax provision	$	6,727	$	3,205		$	18,582		$	12,892

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible pursuant to ASC 740. The Company considers the reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The Company’s evaluation of the realizability of deferred tax assets must consider both positive and negative evidence. The weight given to the potential effects of positive and negative evidence is based on the extent to which it can be objectively verified. Based upon these considerations, the Company determined the necessary valuation allowance as of September 30, 2023.

The Company has filed tax returns in many states. Federal, New York State, New York City, and Utah state tax filings of the Company for the tax years 2020 through the present are the more significant filings that are open for examination.