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INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2024
INCOME TAXES |
INCOME TAXES |
18. | INCOME TAXES
​ Allocation of federal and state income tax between current and deferred portion is as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Years Ended December 31, (in thousands) |  | 2024 |  | 2023 |  | 2022
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Current expense: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Federal | ​ | $ | 24,962 | ​ | $ | 22,015 | ​ | $ | 24,537
State | ​ |  | 6,396 | ​ |  | 5,237 | ​ |  | 5,939
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Deferred expense: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Federal | ​ | ​ | (4,232) | ​ | ​ | (3,329) | ​ | ​ | (4,273)
State | ​ |  | (794) | ​ |  | (1,084) | ​ |  | (464)
Total | ​ | $ | 26,332 | ​ | $ | 22,839 | ​ | $ | 25,739
​ Effective tax rates differ from federal statutory rate applied to income before income taxes due to the following: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Years Ended December 31, | ​ |  | 2024 |  | 2023 |  | 2022 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Federal corporate tax rate | ​ |  | 21.00 | % | 21.00 | % | 21.00 | %
Effect of: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
State taxes, net of federal benefit | ​ |  | 3.47 | ​ | 2.90 | ​ | 3.70 | ​
Low-income housing and R&D tax credits | ​ |  | (3.12) | ​ | (2.67) | ​ | (1.88) | ​
Nontaxable income | ​ |  | (1.03) | ​ | (1.38) | ​ | (1.00) | ​
Tax benefit of vesting employee benefits | ​ | ​ | (0.11) | ​ | (0.06) | ​ | (0.01) | ​
Other, net | ​ |  | 0.41 | ​ | 0.38 | ​ | 0.22 | ​
Effective tax rate | ​ |  | 20.62 | ​ | 20.17 | ​ | 22.03 | ​
​ Year-end DTAs and DTLs were due to the following: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
December 31, (in thousands) |  | 2024 |  | 2023
​ | ​ | ​ | ​ | ​ | ​ | ​
Deferred tax assets: | ​ | ​ | ​ | ​ | ​ | ​
Allowance for credit losses | ​ | $ | 22,944 | ​ | $ | 20,654
Operating lease liabilities | ​ | ​ | 9,261 | ​ | ​ | 8,940
Accrued expenses | ​ |  | 7,306 | ​ |  | 6,285
Net operating loss carryforward(1) | ​ |  | 1,012 | ​ |  | 1,191
Acquisition fair value adjustments | ​ | ​ | 54 | ​ | ​ | 55
Other-than-temporary impairment | ​ |  | 689 | ​ |  | 582
Fair value of cash flow hedges | ​ |  | 162 | ​ |  | —
R&D Capitalization | ​ |  | 5,923 | ​ |  | 4,492
Unrealized investment security losses | ​ | ​ | 4,584 | ​ | ​ | 6,803
Other | ​ |  | 2,303 | ​ |  | 2,337
Total deferred tax assets | ​ |  | 54,238 | ​ |  | 51,339
​ | ​ | ​ | ​ | ​ | ​ | ​
Deferred tax liabilities: | ​ | ​ | ​ | ​ | ​ | ​
Right of use assets - operating leases | ​ | ​ | (9,027) | ​ | ​ | (8,726)
Depreciation and amortization | ​ | ​ | (2,996) | ​ | ​ | (2,805)
Federal Home Loan Bank dividends | ​ |  | (751) | ​ |  | (757)
Deferred loan costs | ​ |  | (2,556) | ​ |  | (2,732)
Lease Financing Receivables | ​ | ​ | (2,802) | ​ | ​ | (3,058)
Mortgage servicing rights | ​ |  | (1,740) | ​ |  | (1,864)
Other | ​ |  | — | ​ |  | —
Total deferred tax liabilities | ​ |  | (19,872) | ​ |  | (19,942)
​ | ​ | ​ | ​ | ​ | ​ | ​
Less: Valuation allowance | ​ |  | — | ​ |  | —
Net deferred tax asset | ​ | $ | 34,366 | ​ | $ | 31,397
(1) | The Company has federal and state net operating loss carryforwards (acquired in its 2016 Cornerstone acquisition) of $4.4 million (federal) and $2.0 million (state). These carryforwards begin to expire in 2030 for both federal and state purposes. The use of these federal and state carryforwards is each limited under IRC Section 382 to $722,000 annually for federal and $634,000 annually for state. Finally, the Company has state AMT credit carryforwards of $15,000 with no expiration date.
​ Unrecognized Tax Benefits ​ The following table shows a reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Years Ended December 31, (in thousands) |  | 2024 |  | 2023 |  | 2022
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Balance, beginning of period | ​ | $ | 2,862 | ​ | $ | 2,866 | ​ | $ | 2,191
Additions based on tax related to the current period | ​ |  | 319 | ​ |  | 280 | ​ |  | 950
Additions for tax positions of prior periods | ​ |  | 2 | ​ |  | 36 | ​ |  | —
Reductions due to the statute of limitations | ​ |  | (384) | ​ |  | (320) | ​ |  | (275)
Balance, end of period | ​ | $ | 2,799 | ​ | $ | 2,862 | ​ | $ | 2,866
​ Of the 2024 total, $2.4 million represented the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. It is the Company’s policy to recognize interest and penalties as a component of income tax expense related to its unrecognized tax benefits. Amounts related to interest and penalties recorded in the income statements for the years ended December 31, 2024, 2023, and 2022, and accrued on the balance sheets as of December 31, 2024, 2023, and 2022 are presented below: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Years Ended December 31, (in thousands) |  | 2024 |  | 2023 |  | 2022
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest and penalties recorded in the income statement as a component of income tax expense | ​ | $ | (68) | ​ | $ | 314 | ​ | $ | 72
Interest and penalties accrued on balance sheet | ​ |  | 1,096 | ​ |  | 1,163 | ​ |  | 849
​ The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by taxing authorities for all years prior to and including 2020. With a few exceptions, which are immaterial in the aggregate, the Company is no longer subject to state income tax examinations for all years prior to and including 2019.

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