Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

18.Income Taxes

The components of income tax expense are as follows:

	Years Ended December 31,
	2021		2020			2019
	(In Thousands)
Current:
Federal	$	24,256	$	25,323		$	11,476
State and local		723		650			210
Deferred		5,393		(9,781	)		(419	)
	$	30,372	$	16,192		$	11,267

The effective tax rates differ from federal statutory rate applied to income before income taxes due to the following:

	Years Ended December 31,
	2021			2020			2019
	(In Thousands)
Tax expense at statutory rate (21%)	$	32,849		$	16,646		$	12,734
Increases (decreases) in taxes from:
State income tax – net of federal tax benefit		571			513			166
Tax exempt interest income, net of TEFRA		(839	)		(806	)		(729	)
Bank owned life insurance		(1,075	)		(882	)		(555	)
Captive insurance		(365	)		(445	)		(354	)
Other		(769	)		1,166			5
Totals	$	30,372		$	16,192		$	11,267

Deferred federal 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 Premier’s deferred federal income tax assets and liabilities are as follows:

	December 31,
	2021		2020
	(In Thousands)
Deferred federal income tax assets:
Allowance for credit losses	$	13,958	$	17,237
Allowance for unfunded commitments		1,056		1,123
Interest on nonaccrual loans		686		1,003
Postretirement benefit costs		395		546
Deferred compensation		2,216		2,057
Individually evaluated loans		1,138		2,483
Net unrealized loss on available-for-sale securities		1,070		—
Accrued vacation		10		10
Accrued bonus		1,054		1,065
Right of use asset		3,391		3,731
Net operating loss carryforward		273		307
Other		2,363		2,175
Total deferred federal income tax assets		27,610		31,737
Deferred federal income tax liabilities:
Equity securities fair value		429		—
Goodwill		4,726		4,542
Mortgage servicing rights		4,103		2,762
Fixed assets		2,368		2,230
Other intangible assets		4,987		7,118
Deferred loan origination fees and costs		1,266		1,294
Net unrealized gain on available-for-sale securities		—		4,009
Prepaid expenses		881		762
Lease liabilities		3,242		3,557
Other		663		25
Total deferred federal income tax liabilities		22,665		26,299
Net deferred federal income tax asset/ (liability)	$	4,945	$	5,438

The realization of the Company’s deferred tax assets is dependent upon the Company’s ability to generate taxable income in future periods and the reversal of deferred tax liabilities during the same period. The Company has evaluated the available evidence supporting the realization of its deferred tax assets and determined it is more likely than not that the assets will be realized and thus no valuation allowance was required at December 31, 2021.

Retained earnings at December 31, 2021, include approximately $32.1 million for which no tax provision for federal income taxes has been made. This amount represents the tax bad debt reserve at December 31, 1987, which is the end of the Company’s base year for purposes of calculating the bad debt deduction for tax purposes. If this portion of retained earnings is used in the future for any purpose other than to absorb bad debts, the amount used will be added to future taxable income. The unrecorded deferred tax liability on the above amount at December 31, 2021, was approximately $6.7 million.

The total amount of interest and penalties recorded in the income statement was $0 for each of the years ended December 31, 2021, 2020 and 2019. The amount accrued for interest and penalties was $0 at December 31, 2021, 2020 and 2019.

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in the states of Indiana and West Virginia. The Company is no longer subject to examination by taxing authorities for years before 2018. At December 31, 2021, the Company also operated in the states of Ohio, Pennsylvania and Michigan, which tax financial institutions based on their equity rather than their income.

The Company’s net operating loss of $1.3 million will be carried forward to use against future taxable income. The net operating loss carryforwards begin to expire in the year ending December 31, 2029. This tax benefit is subject to an annual limitation under Internal Revenue Code Section 382; however, Premier and the Bank expect to utilize the full amount of the benefit.