Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The current and deferred components of income tax expense on the consolidated statements of income were as follows:

	For The Year Ended December 31,
(In thousands)	2020		2019		2018
Current:
Federal	$	15,197	$	11,876	$	14,102
State	1,474		1,241		1,206
	16,671		13,117		15,308
Deferred:
Federal	(1,720)		1,230		(2,541)
State	(41)		29		(61)
	(1,761)		1,259		(2,602)
Income tax expense	$	14,910	$	14,376	$	12,706

    The income tax expense differs from the amount computed by applying the statutory federal income tax rate of 21.0% as a result of the following:

	For The Year Ended December 31,
(Dollars in thousands)	2020			2019			2018
Computed tax expense	$	15,623		$	15,032		$	13,813
Increase (reduction) in income taxes resulting from:
State taxes, net of federal benefit	1,132			1,003			905
Tax exempt income	(894)			(738)			(741)
Income from life insurance	(532)			(509)			(510)
Low income housing credits	(500)			(430)			(465)
Share-based awards	33			(60)			(250)
Other	48			78			(46)
Income tax expense	$	14,910		$	14,376		$	12,706
Income before income taxes	$	74,396		$	71,579		$	65,777
Effective tax rate	20.0		%	20.1		%	19.3		%

Temporary differences between the financial statements carrying amounts and the tax bases of assets and liabilities gave rise to the following deferred tax assets and liabilities as of the dates indicated:

	December 31,
	2020				2019
(In thousands)	Asset		Liability		Asset		Liability
Net operating loss and tax credit carryforward	$	9,593	$	—	$	10,421	$	—
Allowance for loan losses	8,693		—		5,416		—
Pension and other benefits	4,878		—		4,492		—
Net unrealized losses on derivative instruments	1,267		—		1,656		—
Deferred compensation and benefits	961		—		919		—
Net unrealized gains on AFS debt securities	—		(8,027)		—		(890)
Depreciation	—		(3,204)		—		(3,053)
Deferred loan origination fees	—		(2,111)		—		(2,119)
Other			(94)				(19)
Gross deferred tax assets (liabilities)	$	25,392	$	(13,436)	$	22,904	$	(6,081)
Valuation allowance on deferred tax assets			—				—
Net deferred tax assets			$	11,956			$	16,823

At December 31, 2020 and 2019, the Company had $44.4 million and $48.2 million, respectively, in unused federal net operating losses that were acquired in 2015. Due to Internal Revenue Code Section 382(g) limitations, the Company's use of the federal net operating losses acquired is limited to $3.9 million annually, which was determined using the applicable federal rate and the fair value of consideration paid for the acquisition at the acquisition date. The acquired federal net operating losses will expire between 2030 and 2034. The Company expects that it will be able to fully utilize the acquired allowable federal net operating losses prior to expiration, as the Company has a history of generating taxable income well in excess of the limitation.

The Company continuously monitors and assesses the need for a valuation allowance on its deferred tax assets and, at December 31, 2020 and 2019 determined that no valuation allowance was necessary.

As of December 31, 2020, the Company's federal and state income tax returns for the year ended December 31, 2019, 2018 and 2017 were open to audit by federal and state authorities.