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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES
16. INCOME TAXES

Components of income tax expense (benefit) for the years ended December 31, 2024, 2023 and 2022 were as follows:

Year Ended December 31,
(Dollars in thousands)202420232022
Current expense (benefit):
Federal$5,744 $5,538 $996 
State112 1,404 (1,965)
Total current5,856 6,942 (969)
Deferred expense:
Federal6,800 9,300 18,854 
State1,971 1,911 6,956 
Total deferred8,771 11,211 25,810 
Provision for income taxes$14,627 $18,153 $24,841 

Income tax expense (benefit) for the periods presented differed from the "expected" tax expense (computed by applying the U.S. federal corporate tax rate of 21% for the years ended December 31, 2024, 2023 and 2022, to income before income taxes) for the following reasons:

Year Ended December 31,
(Dollars in thousands)202420232022
Computed "expected" tax expense$14,288 $16,133 $20,741 
Increase (decrease) in taxes resulting from:  
Tax-exempt interest income(868)(702)(692)
Other tax-exempt income(1,370)(1,023)(392)
Low-income housing tax credits(940)(508)(530)
State income taxes, net of Federal income tax effect, excluding impact of deferred tax valuation allowance3,354 3,827 4,982 
Change in the valuation allowance for deferred tax assets allocated to income tax expense(1,340)1,048 39 
Prior year deferred adjustments611 (1,043)348 
Other, net892 421 345 
Total$14,627 $18,153 $24,841 
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:

December 31,
(Dollars in thousands)20242023
Deferred tax assets  
Lease liability$8,530 $8,162 
Allowance for credit losses12,643 13,643 
Accrued expenses2,576 1,804 
Employee retirement benefits1,765 1,926 
Federal and state tax credit carryforwards1,590 2,208 
Federal net operating loss carryforwards— 1,644 
State net operating loss carryforwards2,890 4,503 
Deferred compensation4,207 3,976 
Premises and equipment4,460 4,161 
Available-for-sale and held-to-maturity investment securities— 2,309 
Other1,667 3,370 
Total deferred tax assets40,328 47,706 
Deferred tax liabilities 
Right-of-use lease asset8,210 7,918 
Intangible assets2,257 2,317 
Available-for-sale and held-to-maturity investment securities5,749 — 
Other3,180 3,489 
Total deferred tax liabilities19,396 13,724 
Less: Deferred tax valuation allowance3,106 4,446 
Net deferred tax assets$17,826 $29,536 

In assessing the realizability of our net DTA, management considers whether it is more likely than not that some portion or all of the DTA will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income and tax-planning strategies in making this assessment.

As of December 31, 2024, the valuation allowance on our net DTA totaled $3.1 million, which related to our DTA from net apportioned net operating loss ("NOL") carryforwards for California state income tax purposes as the Company does not expect to generate sufficient income in California to utilize the DTA. The net change in the valuation allowance was a decrease of $1.3 million in 2024, compared to an increase of $1.0 million in 2023.

Net of this valuation allowance, the Company's net DTA totaled $17.8 million as of December 31, 2024, compared to a net DTA of $29.5 million as of December 31, 2023, and is included in other assets in the Company's consolidated balance sheets.

The U.S. Federal and most of the state NOL carryforwards, except for California, have been utilized as of December 31, 2024. At December 31, 2024, the Company had NOL carryforwards for California state income tax purposes of $33.7 million, which are available to offset future taxable income. The California state NOL carryforwards will begin to expire if not utilized beginning in 2031. In addition, the Company has low-income housing tax credit carryforwards of approximately $0.4 million and $1.6 million for U.S. Federal and Hawaii state income tax purposes, respectively. If not utilized, the U.S. Federal tax credit carryforwards will begin to expire in 2044. The Hawaii state credit can be carried forward indefinitely.

Utilization of the NOL carryforwards and credits may be subject to annual limitations due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitations may result in
the expiration of net operating losses and credits before they are able to be utilized. The Company does not expect any previous ownership changes, as defined under Sections 382 and 383 of the Internal Revenue Code, to result in an ultimate limitation that will materially reduce the total amount of net operating loss carryforwards that can be utilized.

At December 31, 2024, the Company did not have any material unrecognized tax benefits that, if recognized would favorably affect the effective income tax rate in future periods. The Company does not expect our unrecognized tax benefits to change significantly over the next 12 months.

The Company is subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. As of December 31, 2024, the Company’s federal and state tax returns for 2020 and earlier, were no longer subject to examination by the taxing authorities. However, tax periods closed in a prior period may be subject to audit and re-examination by tax authorities for which tax carryforwards are utilized in subsequent years.