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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES The components of income tax expense (benefit) for the years ended December 31, are as follows:
| Year ended December 31,
($ in thousands) | 2021 |  | 2020 |  | 2019
Current: |  |  |  |  |
Federal | $ | 29,835 |  |  | $ | 25,132 |  |  | $ | 15,470 |
State and local | 5,198 |  |  | 5,009 |  |  | 2,027 |
Total current | 35,033 |  |  | 30,141 |  |  | 17,497 |
Deferred: |  |  |  |  |
Federal | 870 |  |  | (10,651) |  |  | 4,262 |
State and local | (325) |  |  | (1,927) |  |  | 1,538 |
Total deferred | 545 |  |  | (12,578) |  |  | 5,800 |
Total income tax expense | $ | 35,578 |  |  | $ | 17,563 |  |  | $ | 23,297 |
A reconciliation of expected income tax expense, computed by applying the statutory federal income tax rate in 2021, 2020, and 2019 to income before income taxes and the amounts reflected in the consolidated statements of operations is as follows:
| Year ended December 31,
($ in thousands) | 2021 |  | 2020 |  | 2019
Income tax expense at statutory rate | $ | 35,413 |  |  | $ | 19,309 |  |  | $ | 24,368 |
Increase (reduction) in income tax resulting from: |  |  |  |  |
Tax-exempt interest income, net | (3,198) |  |  | (2,010) |  |  | (962) |
State and local income taxes, net | 4,936 |  |  | 3,254 |  |  | 2,816 |
Bank-owned life insurance, net | (713) |  |  | (778) |  |  | (628) |
Non-deductible expenses | 1,090 |  |  | 637 |  |  | 749 |
Tax benefit of low-income housing tax credit ("LIHTC") investments, net | (132) |  |  | (444) |  |  | (278) |
Excess tax benefits | 146 |  |  | (175) |  |  | (526) |
Federal tax credits | (1,136) |  |  | (1,327) |  |  | (913) |
Non-taxable donation to charitable foundation | (263) |  |  | — |  |  | (420) |
Other, net | (565) |  |  | (903) |  |  | (909) |
Total income tax expense | $ | 35,578 |  |  | $ | 17,563 |  |  | $ | 23,297 |
The net amount recognized as a component of tax expense for tax credits, other tax benefits, and amortization from LIHTC investments recognized per the table above was $0.1 million for the year ended December 31, 2021. The net amount recognized as a benefit component of income tax expense per the table above was $0.4 million for the year ended December 31, 2020, and $0.3 million for the year ended December 31, 2019. As of December 31, 2021 and 2020, the carrying value of the investments related to low-income housing tax credits was $7.6 million and $4.2 million, respectively. No impairment losses have been recognized from forfeiture or ineligibility of tax credits or other circumstances during the life of any of the investments. A net deferred income tax asset of $40.9 million and $29.8 million is included in other assets in the consolidated balance sheets at December 31, 2021 and 2020, respectively. The tax effect of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities is as follows:
| Year ended December 31,
($ in thousands) | 2021 |  | 2020
Deferred tax assets: |  |  |
Allowance for loan losses | $ | 36,550 |  |  | $ | 34,031 |
Loans held-for-sale | 6,971 |  |  | 8,058 |
Other real estate | 305 |  |  | 896 |
Deferred compensation | 2,704 |  |  | 2,585 |
Accrued compensation | 5,881 |  |  | 5,391 |
Net operating losses and tax credits | 6,061 |  |  | 6,460 |
Other deferred tax assets | 5,671 |  |  | 3,086 |
Total deferred tax assets | 64,143 |  |  | 60,507 |
Deferred tax liabilities: |  |  |
Acquired loans | 1,709 |  |  | 3,413 |
Unrealized gains on securities | 6,171 |  |  | 12,189 |
Intangible assets | 8,789 |  |  | 7,800 |
Other deferred tax liabilities | 3,754 |  |  | 4,369 |
Total deferred tax liabilities | 20,423 |  |  | 27,771 |
Net deferred tax asset before valuation allowance | 43,720 |  |  | 32,736 |
Less: valuation allowance | 2,830 |  |  | 2,932 |
Net deferred tax asset | $ | 40,890 |  |  | $ | 29,804 |
As part of the Trinity Capital Corporation acquisition in 2019, the company acquired net operating loss, tax credit, and capital loss deferred tax assets. Net operating losses originated in the years 2012, 2014-2017, and 2019 and will expire in the years between 2032-2037. Tax credit carryforwards originated in years 2010-2015 and will expire in the years between 2030-2035. A valuation allowance is provided on deferred tax assets when it is more likely than not that some portion of the assets will not be realized. In 2019, as part of the Trinity Capital Corporation acquisition, the company acquired net operating loss, tax credit, and capital loss deferred tax assets. The company determined it was more likely than not that some of the assets would not be realized. As such, the company has a valuation allowance recorded of $2.8 million and $2.9 million as of December 31, 2021 and 2020, respectively. The Company and its subsidiaries file income tax returns in the federal jurisdiction and in thirty states. The Company is no longer subject to federal, state or local income tax audits by tax authorities for years before 2017, with the exception of 2016 being an open year by one state taxing authority. Net operating losses generated prior to 2016 that are utilized going forward would still be subject to examination. As of December 31, 2021, the gross amount of unrecognized tax benefits was $2.7 million and the total amount of net unrecognized tax benefits that would impact the effective tax rate, if recognized, was $2.5 million. As of December 31, 2020 and 2019, the total amount of the net unrecognized tax benefits that would impact the effective tax rate, if recognized, was $3.1 million and $1.1 million, respectively. The Company believes it is reasonably possible the gross amount of unrecognized benefits will be reduced by approximately $0.4 million as a result of a lapse of statute of limitations in the next 12 months. The Company is under audit by the state of Missouri, and while the Company has concluded it has adequately provided for uncertain tax positions, the outcome of such audits are always uncertain and could result in additional tax expense, though immaterial. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense and classifies such interest and penalties in the liability for unrecognized tax benefits. The amount accrued for interest and penalties was $0.5 million as of December 31, 2021, $0.9 million for 2020 and was not significant for 2019. The activity in the gross liability for unrecognized tax benefits was as follows:
($ in thousands) | 2021 |  | 2020 |  | 2019
Balance at beginning of year | $ | 3,157 |  |  | $ | 1,497 |  |  | $ | 1,301 |
Additions based on tax positions related to the current year | 563 |  |  | 395 |  |  | 401 |
Additions for tax positions of prior years | 436 |  |  | 1,556 |  |  | 62 |
Settlements for tax positions of prior years | (1,289) |  |  | — |  |  | — |
Settlements or lapse of statute of limitations | (170) |  |  | (291) |  |  | (267) |
Balance at end of year | $ | 2,697 |  |  | $ | 3,157 |  |  | $ | 1,497 |

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