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Note 15 - Federal and State Income Taxes | 12 Months Ended
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Dec. 31, 2023
Notes to Financial Statements |
Federal and State Income Taxes | Note 15. Federal and State Income Taxes Federal and state income tax expense was comprised of the following components for the years ended December 31, 2023, 2022, and 2021: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2023 |  | 2022 |  | 2021
​ | ​ | (dollars in thousands)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Current | ​ | $ | 14,008 | ​ | $ | 19,165 | ​ | $ | 7,290
Deferred | ​ |  | (946) | ​ |  | (4,682) | ​ |  | 15,272
​ | ​ | $ | 13,062 | ​ | $ | 14,483 | ​ | $ | 22,562
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ A reconciliation of the expected federal income tax expense to the income tax expense included in the consolidated statements of income was as follows for the years ended December 31, 2023, 2022, and 2021: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | Year Ended December 31, |
​ | ​ | ​ | 2023 | ​ | 2022 | ​ | 2021 |
​ | ​ | ​ | ​ | ​ | ​ | % of | ​ | ​ | ​ | ​ | % of | ​ | ​ | ​ | ​ | % of |
​ | ​ | ​ | ​ | ​ | ​ | Pretax | ​ | ​ | ​ | ​ | Pretax | ​ | ​ | ​ | ​ | Pretax |
​ |  |  | Amount |  | Income |  | Amount |  | Income |  | Amount |  | Income |
​ | ​ | ​ | (dollars in thousands)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Computed "expected" tax expense | ​ | ​ | $ | 26,590 |  | 21.0 | % | $ | 23,845 |  | 21.0 | % | $ | 25,508 |  | 21.0 | %
Tax exempt income, net | ​ | ​ |  | (13,823) |  | (10.9) | ​ |  | (10,689) |  | (9.4) | ​ |  | (7,537) |  | (6.2) | ​
Bank-owned life insurance | ​ | ​ |  | (875) |  | (0.7) | ​ |  | (432) |  | (0.4) | ​ |  | (386) |  | (0.3) | ​
State income taxes, net of federal benefit, current year | ​ | ​ |  | 4,433 |  | 3.5 | ​ |  | 4,482 |  | 3.9 | ​ |  | 5,089 |  | 4.2 | ​
Change in unrecognized tax benefits | ​ | ​ |  | 396 |  | 0.3 | ​ |  | 498 |  | 0.4 | ​ |  | 578 |  | 0.5 | ​
Provision adjustment from accounting method change | ​ | ​ | ​ | (247) | ​ | (0.2) | ​ | ​ | (1,181) | ​ | (1.0) | ​ | ​ | — | ​ | — | ​
Tax credits | ​ | ​ |  | (2,865) |  | (2.3) | ​ |  | (1,362) |  | (1.2) | ​ |  | 34 |  | — | ​
Acquisition costs | ​ | ​ |  | — |  | — | ​ |  | 276 |  | 0.2 | ​ |  | 95 |  | 0.1 | ​
Excess tax benefit on stock options exercised and restricted stock awards vested | ​ | ​ |  | (464) |  | (0.3) | ​ |  | (503) |  | (0.4) | ​ |  | (436) |  | (0.4) | ​
Other | ​ | ​ |  | (83) |  | (0.1) | ​ |  | (451) |  | (0.4) | ​ |  | (383) |  | (0.3) | ​
Federal and state income tax expense | ​ | ​ | $ | 13,062 |  | 10.3 | % | $ | 14,483 |  | 12.7 | % | $ | 22,562 |  | 18.6 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ Changes in the unrecognized tax benefits included in other liabilities are as follows for the years ended December 31, 2023 and 2022: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2023 |  | 2022
​ | ​ | (dollars in thousands)
​ | ​ | ​ | ​ | ​ | ​ | ​
Balance, beginning | ​ | $ | 2,680 | ​ | $ | 2,182
Impact of tax positions taken during current year | ​ |  | 712 | ​ |  | 758
Gross increase related to tax positions of prior years | ​ |  | 110 | ​ |  | 75
Reduction as a result of a lapse of the applicable statute of limitations | ​ |  | (426) | ​ |  | (335)
Balance, ending | ​ | $ | 3,076 | ​ | $ | 2,680
​ | ​ | ​ | ​ | ​ | ​ | ​
​ Included in the unrecognized tax benefits liability at December 31, 2023 are potential benefits of approximately $2.5 million that, if recognized, would affect the effective tax rate. The liability for unrecognized tax benefits includes accrued interest for tax positions, which either do not meet the more-likely-than-not recognition threshold or where the tax benefit is measured at an amount less than the tax benefit claimed or expected to be claimed on an income tax return. At December 31, 2023 and 2022, accrued interest on uncertain tax positions was approximately $486 thousand and $333 thousand, respectively. Estimated interest related to the underpayment of income taxes is classified as a component of “income tax expense” in the statements of income. Note 15. Federal and State Income Taxes (continued) The Company’s federal income tax returns are open and subject to examination from the 2020 tax return year and later. Various state franchise and income tax returns are generally open from the 2019 and later tax return years based on individual state statutes of limitations. The net deferred tax assets consisted of the following as of December 31, 2023 and 2022: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2023 |  | 2022
​ | ​ | (dollars in thousands)
Deferred tax assets: |  | ​ |  |  | ​ |
Historic tax credits | ​ | $ | — | ​ | $ | 68
Low income housing tax credits | ​ |  | — | ​ |  | 226
Net unrealized losses on securities available for sale and derivative instruments | ​ |  | 18,127 | ​ |  | 21,319
Compensation | ​ |  | 15,761 | ​ |  | 13,413
Loan/lease losses | ​ |  | 20,628 | ​ |  | 20,466
Net operating loss carryforwards, federal and state | ​ |  | 630 | ​ |  | 1,262
​ | ​ |  | 55,146 | ​ |  | 56,754
Deferred tax liabilities: | ​ |  |  | ​ |  |
Premises and equipment | ​ |  | 7,206 | ​ |  | 6,271
Equipment financing leases | ​ |  | 2,084 | ​ |  | 2,484
Acquisition fair value adjustments | ​ |  | 3,983 | ​ |  | 3,816
Investment accretion | ​ |  | — | ​ |  | 27
Deferred loan origination fees, net | ​ |  | 1,515 | ​ |  | 1,624
Prepaid expense | ​ | ​ | 1,749 | ​ | ​ | 1,534
Other | ​ |  | 417 | ​ |  | 560
​ | ​ |  | 16,954 | ​ |  | 16,316
Net deferred tax assets | ​ | $ | 38,192 | ​ | $ | 40,438
​ | ​ | ​ | ​ | ​ | ​ | ​
​ At December 31, 2023, the Company had $2.8 million of federal tax NOL carryforwards and $2.0 million of state tax NOL carryforwards. $1.4 million of the federal tax NOL carryforwards are related to the acquisition of Community National and CNB and these losses are set to expire in varying amounts between 2029 and 2033. $2.0 million of the state tax NOL carryforwards are also related to the acquisition of Community National and CNB and are set to expire in varying amounts between 2024 and 2028. The additional $1.4 million of federal tax NOLs were acquired in 2022 with the Guaranty Bank acquisition. The newly acquired federal tax NOLs are expected to be utilized prior to their expiration dates. The change in deferred income taxes was reflected in the Consolidated Financial Statements as follows for the years ended December 31, 2023, 2022, and 2021: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2023 |  | 2022 |  | 2021
​ | ​ | (dollars in thousands)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Provision for income taxes | ​ | $ | (946) | ​ | $ | (4,682) | ​ | $ | 15,272
Statement of stockholders' equity- Other comprehensive income (loss) | ​ |  | 3,192 | ​ |  | (22,066) | ​ |  | (122)
​ | ​ | $ | 2,246 | ​ | $ | (26,748) | ​ | $ | 15,150
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​

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