INCOME TAXES

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 15 – INCOME TAXES

Income tax expense for the year ended December 31, 2022, 2021, and 2020 is listed in the following table

	2022		2021		2020
Current income tax expense
Federal	$	6,679	$	7,614	$	9,054
State		3,321		2,750		2,435
Total current income tax expense		10,000		10,364		11,489
Deferred income tax expense (benefit)
Federal		2,197		1,009		(8,770	)
State		397		583		(2,319	)
Total deferred income tax expense (benefit)		2,594		1,592		(11,089	)
Total income tax expense	$	12,594	$	11,956	$	400

A reconciliation of income tax expense at the U.S. federal statutory rate (21% in 2022, 2021, and 2020) to the Company’s actual income tax expense for the year ended December 31, 2022, 2021, and 2020 is shown below.

	2022			2021			2020
Computed at the statutory rate	$	14,759		$	13,532		$	(15,660	)
Increase (decrease) resulting from:
State and local taxes, net of federal benefit		2,665			2,333			407
Tax-exempt interest		(749	)		(597	)		(766	)
Non-taxable life insurance income		(654	)		(736	)		(408	)
Non-deductible expenses		258			409			183
Share-based payments		(200	)		(480	)		77
Federal tax credits		(4,330	)		(2,754	)		(600	)
Non-deductible goodwill	—			—				17,584
Bargain purchase gain	—				(123	)		(450	)
Change in valuation allowance		354			379			164
Other		491			(176	)		(131	)
Non-deductible transactions costs	—				169		—
Income tax expense	$	12,594		$	11,956		$	400

The increase in the income tax benefit related to federal tax credits was primarily driven by the impact of environmental, social and governance (“ESG”) investments in renewable energy. The benefits of these investments primarily consist of tax credits.

Components of deferred tax assets and liabilities at December 31, 2022 and 2021 are shown in the table below.

	2022			2021
Deferred tax assets
Allowance for credit losses	$	11,691		$	12,514
Tax credit carryforwards		722			810
Goodwill amortization		2,666			2,996
Accrued compensation		2,199			2,583
Net operating loss and attribute carryforwards		2,146			1,907
Net unrealized (gains) losses on securities and cash flow hedges		37,381			(593	)
Other real estate owned		443			508
Other		1,135			1,392
Gross deferred tax assets		58,383			22,117
Deferred tax liabilities
Assumed debt fair market value adjustments		1,267			1,348
Depreciation		5,658			5,148
Federal Home Loan Bank stock dividends		66			219
Core deposit intangibles		1,383			2,330
Acquired loans fair market value adjustments		768			(72	)
Deferred revenue		327			(566	)
Other		509			493
Gross deferred tax liabilities		9,978			8,900
Valuation allowance		(2,122	)		(2,348	)
Net deferred tax asset (liability)	$	46,283		$	10,869

Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. Federal net operating losses acquired through previous acquisitions were fully utilized at December 31, 2020. Acquired federal tax credits totaling $722 at December 31, 2022, will expire between 2030 and 2034. The utilization of these tax credit carryforwards is not expected to be limited by Internal Revenue Code (“IRC”) sections 382 and 383.

The Company and its subsidiaries are subject to U.S. federal income tax as well as state income taxes in multiple jurisdictions. Commercial banks are not allowed to file consolidated Kansas returns with non-bank consolidated group members. The state of Kansas allows net operating losses incurred for tax years beginning after December 31, 2017, to be carried forward indefinitely while those generated prior to this can be carried forward ten years. The Company has unused Kansas net operating loss carryforwards of approximately $47,310 generated through operations and $19,902 acquired through acquisitions. These net operating losses have a valuation allowance of $47,310 and $19,902, respectively, recorded against them and expire between 2022 and 2027 for those incurred for tax years beginning before December 31, 2017, with the remaining carried forward indefinitely. In connection with a 2015 acquisition, the Company acquired Kansas net operating losses usable against Kansas bank income. At December 31, 2022, the there was no remaining Kansas net operating loss carryforward usable against Kansas bank income. In establishing a valuation allowance, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. Based on this analysis, certain deferred tax assets have a valuation allowance recorded against them resulting in a zero carrying value. The Company is generally no longer subject to U.S. federal, state and local tax examinations for years before 2019. The only examination open at the federal and state level at December 31, 2022, was in the state of Missouri for tax years 2019, 2020, and 2021. At this time, no material adjustments are expected related to this audit.