Income Taxes

6 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The provision for income taxes is comprised of the following components for the periods indicated below:

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2024		2023		2024		2023
Income taxes currently payable	$	7,605	$	10,295	$	13,360	$	21,111
Deferred income taxes	(1,617)		(156)		(1,238)		(335)
Provision for income taxes	$	5,988	$	10,139	$	12,122	$	20,776

The tax effects of temporary differences between the tax basis of assets and liabilities and their financial reporting amounts that give rise to deferred income tax assets and liabilities, and their approximate tax effects, are as follows: 

	June 30,		December 31,
(In thousands)	2024		2023
Deferred tax assets:
Loans acquired	$	3,008	$	3,644
Allowance for credit losses	54,806		53,445
Valuation of foreclosed assets	480		480
Tax NOLs from acquisition	9,889		9,643
Deferred compensation payable	3,906		3,355
Accrued equity and other compensation	6,021		8,048
Acquired securities	7,571		7,569
Right-of-use lease liability	17,422		16,501
Unrealized loss on AFS securities	146,072		143,624
Allowance for unfunded commitments	6,148		6,148
Other	8,523		7,627
Gross deferred tax assets	263,846		260,084
Deferred tax liabilities:
Goodwill and other intangible amortization	(39,902)		(41,174)
Accumulated depreciation	(24,861)		(24,632)
Right-of-use lease asset	(16,972)		(16,136)
Unrealized gain on swaps	(28,355)		(25,371)
Other	(11,279)		(10,995)
Gross deferred tax liabilities	(121,369)		(118,308)
Net deferred tax asset	$	142,477	$	141,776

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is shown for the periods indicated below:

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2024		2023		2024		2023
Computed at the statutory rate (21%)	$	9,819	$	14,375	$	19,270	$	26,183
Increase (decrease) in taxes resulting from:
State income taxes, net of federal tax benefit	(301)		454		(726)		697
Stock-based compensation	14		129		468		441
Tax exempt interest income	(3,841)		(3,871)		(7,708)		(7,675)
Tax exempt earnings on BOLI	(781)		(776)		(1,621)		(1,337)
Federal tax credits	(561)		(495)		(1,121)		(934)
Other differences, net	1,639		323		3,560		3,401
Actual tax provision	$	5,988	$	10,139	$	12,122	$	20,776

The Company follows ASC Topic 740, Income Taxes, which prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. ASC Topic 740 also provides guidance on the accounting for and disclosure of unrecognized tax benefits, interest and penalties. The Company has no history of expiring net operating loss carryforwards and is projecting significant pre-tax and financial taxable income in future years. The Company expects to fully realize its deferred tax assets in the future.

The amount of unrecognized tax benefits may increase or decrease in the future for various reasons including adding amounts for current tax year positions, expiration of open income tax returns due to the statutes of limitation, changes in management’s judgment about the level of uncertainty, status of examinations, litigation and legislative activity and the addition or elimination of uncertain tax positions.

Section 382 of the Internal Revenue Code imposes an annual limit on the ability of a corporation that undergoes an “ownership change” to use its U.S. net operating losses to reduce its tax liability. The Company has engaged in three tax-free reorganization transactions in which acquired net operating losses are limited pursuant to Section 382. In total, approximately $36.5 million of federal net operating losses subject to the IRC Section 382 annual limitation are expected to be utilized by the Company. All of the acquired net operating loss carryforwards are expected to be fully utilized by 2036.

The Company files income tax returns in the U.S. federal jurisdiction. The Company’s U.S. federal income tax returns are open and subject to examinations from the 2020 tax year and forward. The Company’s various state income tax returns are generally open from the 2020 and later tax return years based on individual state statute of limitations.