Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):

	2022		2021
Allowance for credit losses	$	4,102	$	4,395
Deferred compensation payable	3,279		3,538
Underfunded pension liability	1,200		1,112
Accrued expenses	1,265		1,693
Unrealized securities losses	40,380		—
Other	4,812		4,876
Total Deferred Tax Assets	55,038		15,614
Unrealized securities gains	—		5,680
Other	10,154		9,871
Total Deferred Tax Liabilities	10,154		15,551
Net Deferred Tax Assets/(Liabilities)	$	44,884	$	63

    No material valuation allowances for deferred tax assets were recorded at December 31, 2022 or 2021 as the Company believes it is more likely than not that all of the deferred tax assets will be realized because they were supported by recoverable taxes paid in prior years.

Significant components of the provision for income taxes are as follows (in thousands): 

	2022		2021		2020
Current:
Federal	$	20,481	$	17,248	$	16,599
State	3,313		3,681		2,478
Total current tax expense	23,794		20,929		19,077
Total deferred tax expense	1,469		2,185		2,640
Income tax expense	$	25,263	$	23,114	$	21,717

    A reconciliation of the significant differences between the federal statutory income tax rate and the Company’s effective income tax rate is as follows (in thousands):

	2022			2021			2020
Computed federal taxes at statutory rate	$	26,740		$	23,351		$	23,376
State income taxes, net of federal tax benefit	2,871			3,124			2,070
Tax effects of:
Tax-exempt interest income	(1,142)			(1,177)			(944)
Bank-owned life insurance	(1,167)			(818)			(929)
Income tax credits	(1,904)			(1,449)			(1,113)
Other items, net	(135)			83			(743)
Income tax expense	$	25,263		$	23,114		$	21,717
Effective tax rate	19.8		%	20.8		%	19.5		%

The entire amount of the Company’s unrecognized tax benefits, if recognized, would favorably affect the Company’s effective tax rate.   The Company anticipates that it will release $0.5 million over the next 12 months.  A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows (in thousands):

	2022		2021
Beginning balance	$	1,846	$	2,089
Additions for current year tax positions	351		368
Decreases for prior year tax positions	(17)		(45)
Decreases related to lapse of applicable statute of limitation	(561)		(566)
Ending balance	$	1,619	$	1,846

Interest and penalties on income tax uncertainties are included in income tax expense.  During 2022, 2021 and 2020, the provision related to interest and penalties was approximately $0.1 million, $0.1 million and $0.2 million, respectively. The balance of accrued interest and penalties at December 31, 2022 and 2021 was $1.1 million and $1.0 million, respectively.

    The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and various state taxing authorities for the years ended December 31, 2019 and forward.