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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The components of applicable income tax expense (benefit) for the years ended December 31, 2024, December 31, 2023, and December 31, 2022, were as follows (in thousands):
| December 31, 2024 |  | December 31, 2023 |  | December 31, 2022
Current Expense: |  |  |  |  |
Federal | $ | 4,464 |  |  | $ | 3,592 |  |  | $ | 5,501 |
State | 1,233 |  |  | 230 |  |  | 1,388 |
| $ | 5,697 |  |  | $ | 3,822 |  |  | $ | 6,889 |
Deferred Expense: |  |  |  |  |
Federal | $ | (1,181) |  |  | $ | (1,422) |  |  | $ | 1,318 |
State | (326) |  |  | (31) |  |  | 79 |
| $ | (1,507) |  |  | $ | (1,453) |  |  | $ | 1,397 |
Total | $ | 4,190 |  |  | $ | 2,369 |  |  | $ | 8,286 |
Deferred income taxes are provided on the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and net operating losses and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and net operating loss carry-forwards and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable 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 in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deferred tax assets. The Company follows accounting guidance related to accounting for uncertainty in income taxes. Under the “more likely than not” threshold guidelines, the Company’s uncertain tax position reserve was zero and $167 thousand as of December 31, 2024, and December 31, 2023, respectively. The Company’s policy is to account for interest and penalties as a component of income tax expense. The Company is no longer subject to examination by federal, state, and local taxing authorities for years before January 1, 2021. The following reconciles the amount of reported income tax expense in the financial statements to taxes that would be computed by applying the federal statutory tax rates to income before taxes (in thousands):
| December 31, 2024 |  | December 31, 2023 |  | December 31, 2022
Expected taxes using statutory rates | $ | 8,286 |  |  | $ | 5,263 |  |  | $ | 10,983 |
Benefit of tax-exempt municipal interest income, net of non-deductible interest | (1,143) |  |  | (363) |  |  | (1,694) |
Nontaxable income from company-owned life insurance | (991) |  |  | (604) |  |  | (570) |
Low income tax credits, net of amortization | (3,619) |  |  | (1,840) |  |  | (1,840) |
State taxes, net of federal benefit | 716 |  |  | 157 |  |  | 1,159 |
Merger-related | 280 |  |  | 382 |  |  | — |
Non-deductible compensation | 530 |  |  | — |  |  | — |
Other adjustment, net | 131 |  |  | (626) |  |  | 248 |
Total | $ | 4,190 |  |  | $ | 2,369 |  |  | $ | 8,286 |
Deferred income taxes reflect the impact of “temporary differences” between amounts of assets and liabilities for financial reporting purposes and such amounts as measured for tax purposes. Deferred tax assets and liabilities represent the future tax return consequences of temporary differences, which will either be taxable or deductible when the related assets and liabilities are recovered or settled. The net deferred tax amounts in the accompanying Consolidated Balance Sheets include the following components (in thousands):
| December 31, 2024 |  | December 31, 2023
Deferred tax assets: |  |  |
Provision for credit losses | $ | 16,387 |  |  | $ | 5,600 |
Lease liability | 3,914 |  |  | 2,008 |
Compensation accruals | 10,714 |  |  | 1,984 |
Other accruals | 442 |  |  | 27 |
Partnership investments | 2,587 |  |  | 2,264 |
Purchase accounting adjustments | 35,497 |  |  | — |
Unrealized losses on securities available-for-sale | 26,627 |  |  | 26,069 |
Tax credit carryforward | 9,777 |  |  | 8,690 |
OPEB Liability | 188 |  |  | — |
Total deferred tax asset | $ | 106,133 |  |  | $ | 46,642 |
Deferred tax liabilities: |  |  |
Tax over book depreciation | $ | (6,003) |  |  | $ | (2,073) |
Pension accrual | (458) |  |  | (434) |
Unrealized gains on interest rate swaps | (833) |  |  | (85) |
Purchase accounting adjustments | (16,588) |  |  | — |
Right of use asset | (3,757) |  |  | (1,906) |
Mortgage servicing rights | (460) |  |  | — |
Total deferred tax liability | $ | (28,099) |  |  | $ | (4,498) |
Net deferred tax asset | $ | 78,034 |  |  | $ | 42,144 |

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