Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes

Income Taxes

Note 19 Income Taxes

Income tax expense attributable to income before taxes was $33.6 million, $14.9 million and $21.4 million for 2023, 2022 and 2021, respectively.

(a) Income taxes

Total income taxes for 2023, 2022 and 2021 were allocated as follows:

	For the years ended December 31,
	2023		2022		2021
Current expense:
U.S. federal	$	30,319	$	7,193	$	13,746
State and local		5,750		1,831		2,643
Total current income tax expense		36,069		9,024		16,389
Deferred expense:
U.S. federal		(1,564)		5,100		4,327
State and local		(951)		786		649
Total deferred income tax expense		(2,515)		5,886		4,976
Income tax expense	$	33,554	$	14,910	$	21,365

(b) Tax Rate Reconciliation

The reconciliation between the income tax expenses and the amounts computed by applying the U.S. federal income tax rate to pretax income is as follows:

	For the years ended December 31,
	2023		2022		2021
Income tax at federal statutory rates (21%)	$	36,876	$	18,098	$	24,144
State income taxes, net of federal benefits		3,791		2,067		2,601
Tax-exempt loan interest income		(4,437)		(5,208)		(4,862)
Research and development tax credit		(2,400)		—		—
Non-deductible compensation		642		514		852
Stock-based compensation		(345)		(402)		(733)
Bank-owned life insurance income		(777)		(374)		(603)
Non-deductible acquisition costs		—		427		—
Other		204		(212)		(34)
Income tax expense	$	33,554	$	14,910	$	21,365

(c) Significant Components of Deferred Taxes

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2023 and 2022 are presented below:

	December 31, 2023		December 31, 2022
Deferred tax assets:
Net unrealized losses on investment securities	$	24,367	$	26,938
Allowance for credit losses		23,685		20,967
Lease liability		7,764		8,549
Accrued compensation		4,939		4,535
Accrued stock-based compensation		2,116		1,742
Capitalized research and development costs		1,108		783
Nonaccrual interest income		1,083		812
Net unrealized losses on equity securities		945		—
Capitalized start-up costs		591		891
Net operating loss		461		507
Excess tax basis of acquired loans over carrying value		438		625
Other reserves		434		814
Other real estate owned		425		369
Net deferred loan fees		419		—
Accrued expenses		192		942
Other		1,890		1,087
Total deferred tax assets		70,857		69,561
Deferred tax liabilities:
Intangible assets		(11,883)		(9,943)
Right of use assets		(7,404)		(8,300)
Premises and equipment		(4,840)		(4,722)
Mortgage servicing rights		(1,702)		(2,769)
Excess book basis in partnerships		(908)		(989)
Net deferred loan fees		—		(383)
Other		(2,458)		(738)
Total deferred tax liabilities		(29,195)		(27,844)
Net deferred tax asset	$	41,662	$	41,717

At December 31, 2023, the Company had federal and state net operating loss carryovers (“NOLs”) of $1.6 million and $3.1 million, respectively, which are available to offset future taxable income. The federal NOLs expire in varying amounts through 2034, and the state NOLs expire in varying amounts between 2026 and 2035. While these NOLs are subject to certain restrictions on the amount that can be utilized per year, the Company does not expect any tax attribute carryovers to expire before they are utilized.

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 be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, if any (including the impact of available carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. For the years ended December 31, 2023 and 2022, management believes a valuation allowance on the deferred tax asset is not necessary based on the current and future projected earnings of the Company. The Company has no ASC 740-10 unrecognized tax benefits recorded as of December 31, 2023 and 2022 and does not expect the total amount of unrecognized tax benefits to significantly increase within the next 12 months. The Company and its subsidiary banks are subject to income tax by federal, state and local government taxing authorities. The Company is not currently subject to any open income tax examinations; however, the Company’s tax returns for the years ended December 31, 2020 through 2023 remain subject to examination by U.S. federal income tax authorities. The years open to examination by state and local government authorities vary by jurisdiction.