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Income Taxes | 3 Months Ended
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Mar. 31, 2025
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes For the three months ended March 31, 2025, we utilized the discrete effective tax rate method, treating the year-to-date period as if it was the annual period to calculate our interim income tax provision, as allowed by ASC 740-270-30-18, "Income Taxes – Interim Reporting." We determined we could not use the estimated annual effective tax rate method as we could not calculate a reliable estimate of the annual effective tax rate due to it being highly sensitive to minor changes in our forecasted amounts, thus generating significant variability in the estimated annual effective tax rate and distorting the customary relationship between income tax expense and pre-tax income in interim periods. Income tax expense for the three months ended March 31, 2025 and 2024 differs from the amount computed by applying the statutory federal income tax rate to income before income taxes. The sources and tax effects of the differences are as follows:
| Three Months Ended March 31,
| 2025 |  | 2024
U.S. federal statutory tax rate | 21.0 | % |  | 21.0 | %
State income taxes, net of federal tax benefit | 3.4 |  |  | (1.4) |
Foreign tax rate differential | (0.2) |  |  | (1.5) |
General business credits | (1.1) |  |  | (11.5) |
IRC 162(m) limitation | (2.9) |  |  | (3.6) |
Stock-based compensation | 3.8 |  |  | 22.7 |
Bank owned life insurance income | (1.0) |  |  | (2.9) |
Bank owned life insurance surrender | — |  |  | 9.3 |
Nondeductible expenses | 0.3 |  |  | 2.6 |
Other | 0.1 |  |  | 0.1 |
Effective tax rate | 23.4 | % |  | 34.8 | %
The effective tax rate for the three months ended March 31, 2025 and 2024 differs from the statutory federal income tax rate of 21%, primarily due to state income taxes, net of federal tax benefits, general business credits, stock-based compensation, nondeductible expenses, cash surrender value growth in bank owned life insurance policies, and the Internal Revenue Code (the "IRC") 162(m) limitation on the deductibility of executive compensation. The net decrease in the effective tax rate for the three months ended March 31, 2025 from the prior year comparable period was due to several factors, including a decrease of $0.7 million in the amount of compensation expense that was subject to the IRC 162(m) limitation on the deductibility of certain executive compensation, a $0.3 million decrease in tax expense associated with shortfalls from stock-based compensation, a $0.1 million decrease in tax expense due to nondeductible expenses, a decrease of $0.7 million related to our bank owned life insurance surrender penalties we incurred in connection with the surrender and restructuring of our existing bank owned life insurance policies completed in 2024, and the impact of general business credits. These decreases were partially offset by an increase of $1.3 million in state income taxes, net of federal benefits. We have made a policy election to account for Global Intangible Low-Taxed Income ("GILTI") in the year the GILTI tax is incurred. For the three months ended March 31, 2025 and 2024, the provision for GILTI tax expense was not material to our financial statements. We establish a valuation allowance when we consider it more-likely-than-not that some portion or all of the deferred tax assets will not be realized. As of March 31, 2025, we have a valuation allowance recorded against a portion of our unrealized loss on equity securities as we believe it is more-likely-than-not that the tax benefits related to this portion of the loss will not be realized. As of March 31, 2024, we did not have a valuation allowance on any of our deferred tax assets as we believed it was more-likely-than-not that we would realize the benefits of our deferred tax assets. We are subject to examination by the Internal Revenue Service (the "IRS"), and various state tax authorities. We remain subject to examination of our federal income tax returns for the years ended December 31, 2017 through 2024. We generally remain subject to examination of our various state income tax returns for a period of four to five years from the respective dates that the returns were filed. The IRS initiated an examination of our 2017 U.S. federal tax return during the second quarter ended June 30, 2020, and the examination remains ongoing as of March 31, 2025. We do not expect that this examination will have a material impact on our consolidated financial statements. Note 10—Income Taxes (continued) As of March 31, 2025, we had federal net operating loss carryforwards of approximately $11.1 million, state net operating loss carryforwards of approximately $120.1 million, and capital loss carryforwards of approximately $0.1 million which will be available to offset future income. If not used, the federal net operating losses will expire between 2030 and 2034. Of our total state net operating loss carryforwards, approximately $62.6 million will expire between 2028 and 2044, while the remaining balance of approximately $57.5 million does not expire and carries forward indefinitely. The capital loss carryforwards will expire in 2028. The net operating losses are subject to an annual IRC Section 382 limitation, which restricts their utilization against taxable income in future periods. In addition, we have state business tax credits of approximately $22.7 million that can be carried forward indefinitely and other state business tax credits of approximately $0.3 million that will begin expiring on December 31, 2025 and continue to expire through December 31, 2027. As of March 31, 2025 and December 31, 2024, we had a liability of $13.9 million and $12.5 million, respectively, for unrecognized tax benefits related to various federal and state income tax matters excluding interest, penalties and related tax benefits. The reconciliation of the beginning unrecognized tax benefits balance to the ending balance is as follows:
| Three Months Ended March 31,
| 2025 |  | 2024
| (In thousands)
Beginning balance | $ | 12,541 |  |  | $ | 12,109 |
Increases related to positions taken during prior years | 1,314 |  |  | 1,380 |
Ending balance | $ | 13,855 |  |  | $ | 13,489 |
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate | $ | 13,301 |  |  | $ | 12,980 |
As of March 31, 2025 and 2024, we recognized accrued interest and penalties related to unrecognized tax benefits of approximately $1.8 million and $1.4 million, respectively.

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