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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
Note 14 – Income Taxes
 
The following presents the components of income tax expense for the years ended December 31:
(Dollars in thousands)202320222021
Current income tax provision (benefit):
   
Federal$(2,231)$61,962 $59,333 
State1,458 32,754 32,794 
Total current income tax provision (benefit)
(773)94,716 92,127 
Deferred income tax provision:
   
Federal3,127 3,705 18,753 
State835 2,194 10,054 
Total deferred income tax provision
3,962 5,899 28,807 
Total income tax provision$3,189 $100,615 $120,934 
 
A reconciliation from statutory federal income taxes, which are based on a statutory rate of 21% for 2023, 2022, and 2021, to the Company’s total effective income tax provisions for the years ended December 31 is as follows:
(Dollars in thousands)202320222021
Statutory federal income tax provision$7,149 $80,715 $96,773 
State taxes, net of federal income tax effect1,132 27,986 34,001 
Cash surrender life insurance(2,402)(2,238)(1,890)
Tax-exempt interest(3,084)(5,215)(6,803)
LIHTC investments(2,653)(2,441)(2,716)
Stock-based compensation windfall(49)(1,954)(1,356)
Section 162(m) of the Internal Revenue Code1,825 2,956 2,015 
Nondeductible meals and parking736 588 624 
Other535 218 286 
Total income tax provision$3,189 $100,615 $120,934 

Deferred tax assets (liabilities) were comprised of the following temporary differences between the financial statement carrying amounts and the tax basis of assets at December 31:
(Dollars in thousands)20232022
Deferred tax assets:  
Accrued expenses$5,013 $4,022 
Net operating loss7,885 4,803 
Allowance for credit losses, net of bad debt charge-offs60,007 62,582 
Deferred compensation2,940 3,127 
State taxes332 6,965 
Loan net discounts12,240 15,566 
Stock-based compensation4,444 4,327 
Operating lease liabilities13,313 16,522 
Unrealized loss on AFS investment securities39,253 105,313 
Federal and state credit carryovers157 157 
Other740 1,422 
Total deferred tax assets146,324 224,806 
Deferred tax liabilities:  
Operating lease right-of-use assets(11,742)(14,378)
Core deposit intangibles(10,843)(14,017)
Loan origination costs(6,666)(8,567)
Depreciation(3,493)(4,242)
Total deferred tax liabilities(32,744)(41,204)
Valuation allowance— — 
Net deferred tax assets$113,580 $183,602 
The Company accounts for income taxes by recognizing deferred tax assets and liabilities based upon temporary differences between the amounts for financial reporting purposes and the tax basis of its assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management evaluates both positive and negative evidence, including the existence of any cumulative losses in the current year and the prior two years, the forecasts of future income, applicable tax planning strategies, and assessments of current and future economic and business conditions. This analysis is updated quarterly and adjusted as necessary. Based on the analysis, the Company has determined that a valuation allowance for deferred tax assets was not required as of December 31, 2023 and 2022.

As of December 31, 2023, the Company had federal and state net operating loss carryforwards of approximately $35.9 million and $4.8 million, respectively. The federal and state net operating losses of $20.9 million and $4.8 million will begin to expire in 2026 and 2029, respectively, unless previously utilized. Approximately $15.0 million of the federal net operating losses can be carried forward indefinitely. In addition, the Company has a tax credit carryforward of $156,000, which is scheduled to expire by 2040.

Under Section 382 of the Code, annual use of our net operating losses and tax credits may be limited if a cumulative change in ownership of more than 50% occurs within a three-year period. Except for the $15.0 million federal net operating losses, the Company’s federal and state net operating losses and tax credits are subject to the limitation under Section 382. The Company is expected to fully utilize the federal and state net operating losses and tax credits before expiration with the application of the Section 382 annual limitation.

The Company and its subsidiaries are subject to U.S. Federal income tax as well as income and franchise tax in multiple state jurisdictions. The statute of limitations related to the consolidated Federal income tax returns is closed for all tax years up to and including 2019. The expirations of the statutes of limitations related to the various state income and franchise tax returns vary by state. The Company is currently not under examination in any major taxing jurisdiction.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31 is as follows:

(Dollars in thousands)20232022
Balance at January 1,$1,437 $1,437 
Increases based on tax positions related to prior years— — 
Decreases related to settlements with taxing authorities— — 
Decreases related to lapse of statute of limitation— — 
Balance at December 31,$1,437 $1,437 

The total amount of unrecognized tax benefits was $1.4 million at December 31, 2023 and 2022, and is primarily comprised of unrecognized tax benefits related to the Opus acquisition in 2020. The total amount of tax benefits that, if recognized, would favorably impact the effective tax rate was $563,000 at December 31, 2023 and 2022. It is reasonably possible that $1.1 million of the Company's unrecognized tax benefits may be recognized within the next 12 months due to a lapse of the statute of limitations.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The Company has accrued $200,000 and $89,000 for such interest at December 31, 2023 and 2022, respectively. No amounts for penalties were accrued at December 31, 2023 and 2022.