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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes
NOTE 13 - INCOME TAXES
The components of income taxes are as follows:
202420232022
 (dollars in thousands)
Current tax expense:
Federal$66,817 $49,707 $44,478 
State12,256 11,137 6,906 
Total current tax expense79,073 60,844 51,384 
Deferred tax (benefit) expense:
Federal(20,248)3,021 8,974 
State(2,939)576 (324)
Total deferred tax (benefit) expense(23,187)3,597 8,650 
Total income tax expense$55,886 $64,441 $60,034 

The differences between the effective income tax rate and the federal statutory income tax rate are as follows:
202420232022
Statutory tax rate21.0 %21.0 %21.0 %
Tax credit investments(0.3)(1.3)(2.0)
Tax-exempt income(4.3)(4.2)(3.5)
Bargain purchase gain(2.3)— — 
Bank owned life insurance(0.9)(0.8)(0.7)
State income taxes, net of federal benefit1.9 2.6 1.2 
Executive compensation0.1 0.3 0.3 
FDIC Premium0.8 0.5 0.3 
Other, net0.2 0.4 0.7 
Effective income tax rate16.2 %18.5 %17.3 %
The net DTA recorded by the Corporation is included in other assets and consists of the following tax effects of temporary differences as of December 31:
20242023
(dollars in thousands)
Deferred tax assets:
Unrealized holding losses on securities$85,516 $90,671 
Allowance for credit losses90,148 71,013 
Lease liability34,921 21,570 
State loss carryforwards26,118 27,948 
Other accrued expenses16,142 11,082 
Deferred compensation11,138 10,215 
Intangible assets5,889 7,460 
Stock-based compensation5,458 5,129 
Tax credit carryforwards— 4,995 
Other7,444 5,469 
Total gross deferred tax assets$282,774 $255,552 
Deferred tax liabilities:
Equipment lease financing45,644 47,345 
Right-of-use-asset31,960 20,022 
Acquisition premiums/discounts16,360 5,508 
MSRs6,952 7,158 
Postretirement and defined benefit plans5,560 3,438 
Tax credit investments2,033 1,747 
Premises and equipment736 1,678 
Total gross deferred tax liabilities$109,245 $86,896 
Net deferred tax asset, before valuation allowance173,529 168,656 
Valuation allowance(26,118)(27,948)
Net deferred tax asset$147,411 $140,708 

In assessing the realizability of DTAs, management considers whether it is more likely than not that some or all of the DTAs will not be realized. The ultimate realization of DTAs is dependent upon the generation of future taxable income and/or capital gain income during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies, such as those that may be implemented to generate capital gains, in making this assessment.

The valuation allowance relates to state net operating loss carryforwards for which realizability is uncertain. As of December 31, 2024 and 2023, the Corporation had state net operating loss carryforwards of approximately $389.3 million and $354.1 million, respectively, which are available to offset future state taxable income, and expire at various dates through 2044.

As of December 31, 2024, based on the level of historical taxable income and projections for future taxable income over the periods in which the DTAs are deductible, management believes it is more likely than not that the Corporation will realize the benefits of its DTAs, net of the valuation allowance.

Uncertain Tax Positions
The following table summarizes the changes in unrecognized tax benefits for the years ended December 31:
202420232022
(dollars in thousands)
Balance at beginning of year$1,044 $1,228 $1,673 
Current period tax positions120 147 112 
Lapse of statute of limitations(104)(331)(557)
Balance at end of year$1,060 $1,044 $1,228 
Virtually all of the Corporation's unrecognized tax benefits are for positions that are taken on an annual basis on state tax returns. Increases to unrecognized tax benefits will occur as a result of accruing for the nonrecognition of the position for the current year.

Decreases will occur as a result of the lapsing of the statute of limitations for the oldest outstanding year which includes the position. These offsetting increases and decreases are likely to continue in the future, including over the next twelve months. While the net effect on total unrecognized tax benefits during this period cannot be reasonably estimated, approximately $82 thousand is expected to reverse in 2025 due to lapsing of the statute of limitations. Decreases can also occur throughout the settlement of positions with taxing authorities.

As of December 31, 2024, if recognized, all of the Corporation's unrecognized tax benefits would impact the effective tax rate. Not included in the table above is $134 thousand of federal income tax benefit on unrecognized state tax benefits which, if recognized, would also impact the effective tax rate. Interest accrued related to unrecognized tax benefits is recorded as a component of income tax expense. Penalties, if incurred, would also be recognized in income tax expense. The Corporation recognized approximately $168 thousand and $138 thousand of recoveries in 2024 and 2023, respectively, for interest and penalties in income tax expense related to unrecognized tax positions. As of December 31, 2024 and 2023, total accrued interest and penalties related to unrecognized tax positions were approximately $177 thousand and $0.3 million, respectively.

The Corporation files income tax returns in the federal and various state jurisdictions. In most cases, unrecognized tax benefits are related to tax years that remain subject to examination by the relevant taxing authorities. With few exceptions, the Corporation is no longer subject to federal, state and local examinations by tax authorities for years before 2021.

Tax Credit Investments

The TCIs are included in other assets, with any unfunded equity commitments recorded in other liabilities on the consolidated balance sheets and changes are reflected in change in tax credit investments in the consolidated statements of cash flows.

In 2023, the Corporation adopted ASU 2023-02, which allows all TCIs to qualify for the proportional amortization method if: (1) it is probable that the income tax credits allocatable to the Corporation will be available; (2) the Corporation does not have the ability to exercise significant influence over the operating and financial policies of the underlying project; (3) substantially all of the projected benefits are from income tax credits and other income tax benefits; (4) the Corporation's projected yield based solely on the cash flows from the income tax credits and other income tax benefits is positive; and (5) the Corporation is a limited liability investor in the limited liability entity for both legal and tax purposes, and the Corporation’s liability is limited to its capital investment. See "Note 1 - Summary of Significant Accounting Policies" in the Notes to the Consolidated Financial Statements.

All TCIs held as of December 31, 2024 that qualify for the proportional amortization method are amortized over the period the Corporation expects to receive the tax credits, with the expense included within income taxes on the Consolidated Statements of Income and net income in the Consolidated Statements of Cash Flows.

All TCIs are evaluated for impairment at the end of each reporting period. There were no impairments recorded against TCIs during 2024.

The following table presents the balances of the Corporation's TCIs and related unfunded commitments as of December 31:
20242023
Included in other assets:(dollars in thousands)
Affordable housing tax credit investments, net$211,572 $170,115 
Other tax credit investments, net29,649 35,907 
Total TCIs, net$241,221 $206,022 
Included in other liabilities:
Unfunded affordable housing tax credit commitments$84,572 $58,312 
Other tax credit liabilities24,109 28,361 
Total unfunded tax credit commitments and liabilities$108,681 $86,673 


The following table presents other information relating to the Corporation's TCIs for the years ended December 31:
202420232022
(dollars in thousands)
Components of income taxes:
Tax credits and benefits$(26,762)$(28,748)$(27,154)
Amortization of tax credits and benefits, net of tax benefits25,069 23,446 19,298 
Deferred tax expense559 610 766 
Total reduction in income tax expense$(1,134)$(4,692)$(7,090)
Amortization of TCIs:
Total amortization of TCIs$— $— $2,783