Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Federal and state income tax expense consists of the following for the years ended December 31:

(dollars in thousands)	2022		2021		2020
Current federal income tax expense	$	37,182	$	39,865	$	40,201
Current state income tax expense	5,008		15,348		12,059
Total current tax expense	42,190		55,213		52,260
Deferred federal income tax expense (benefit)	3,532		5,185		(5,212)
Deferred state income tax benefit	3,028		585		(3,120)
Total deferred tax expense (benefit)	6,560		5,770		(8,332)
Total income tax expense	$	48,750	$	60,983	$	43,928

The Company had net deferred tax assets (deferred tax assets in excess of deferred tax liabilities) of $96.6 million and $43.2 million for the years ended at December 31, 2022 and 2021, respectively, which related primarily to our unrealized loss on securities, allowance for credit losses and loan origination fees. Management believes it is more likely than not that all of the deferred tax assets will be realized with the exception of certain state net operating losses.

Temporary timing differences between the amounts reported in the Consolidated Financial Statements and the tax bases of assets and liabilities result in deferred taxes. The table below summarizes significant components of our deferred tax assets and liabilities as of December 31, 2022 and 2021:

(dollars in thousands)	2022		2021
Deferred tax assets
Allowance for credit losses	$	18,490	$	19,736
Deferred loan fees and costs	6,736		6,559
Leases	7,195		9,283
Stock-based compensation	1,796		1,132
Net operating loss	7,736		7,623
Unrealized loss on securities available-for-sale	50,442		4,987
Unrealized loss on securities held-to-maturity	14,366		—
SERP	2,495		5,631
Premises and equipment	(205)		1,328
Other assets	1,344		2,011
Valuation allowances	(7,008)		(6,724)
Total deferred tax assets	103,387		51,566
Deferred tax liabilities
Excess servicing	(589)		(402)
Leases	(6,034)		(7,990)
Other liabilities	(197)		—
Total deferred tax liabilities	(6,820)		(8,392)
Net deferred income tax assets	$	96,567	$	43,174

As of December 31, 2022. the Company has $3.6 million of federal net operating loss carryforward in conjunction with the Fidelity acquisition, that is subject to annual limits under Section 382 of the Internal Revenue Code and expires in 2027. The Company has concluded, based on the weight of available positive and negative evidence, a portion of its state net operating loss deferred tax asset is not more likely than not to be realized and accordingly, a valuation allowance of $7.0 million and $6.7 million is carried as of December 31, 2022 and 2021, respectively.

A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate for the years ended December 31, 2022, 2021 and 2020 follows:

	2022		2021		2020
Statutory federal income tax rate	21.00	%	21.00	%	21.00	%
Increase (decrease) due to:
State income taxes	3.28	%	5.45	%	5.04	%
Non-deductible fines and penalties	2.54	%	—	%	—	%
Tax-exempt interest and dividend income	(1.57)	%	(0.91)	%	(0.75)	%
Stock-based compensation expense	0.19	%	0.44	%	0.25	%
Other	0.26	%	(0.32)	%	(0.63)	%
Effective tax rate	25.70	%	25.66	%	24.91	%

The Company remains subject to examination by taxing authorities for the years ending after December 31, 2018. Management has identified no uncertain tax positions at December 31, 2022.