Income Taxes

6 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Note 10—Income Taxes

The Company uses an estimated annual effective tax rate method in computing its interim tax provision. This effective tax rate is based on forecasted annual pre-tax income, permanent tax differences and statutory tax rates.

The effective tax rate for the six months ended June 30, 2024 and 2023 was 25.5% and 25.9%, respectively. The Company recorded discrete income tax benefit of $564,000 and $140,000 related to the exercise of stock options and vesting of restricted shares for the six months ended June 30, 2024 and 2023, respectively.

Net deferred tax assets decreased to $48.9 million at June 30, 2024 compared to $50.1 million at December 31, 2023. The net decrease in the total net deferred tax assets was a result of a decreases in the allowance for credit losses - loans and leases, and loan basis and net operating losses, partially offset by an increase in unrealized losses on available-for-sale securities.

During the second quarter 2024, Illinois House Bill 4951 was enacted, which amends numerous Illinois tax law provisions, including a temporary limitation on Net Loss Deduction ("NLD") usage. For tax years 2024, 2025, and 2026, C Corporations are limited to applying a maximum of $500,000 of NLD to taxable income.