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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Federal and state income tax expense consists of the following for the years ended December 31:
(dollars in thousands) |  | 2024 |  | 2023 |  | 2022
Current federal income tax expense |  | $ | 9,897 |  |  | $ | 25,291 |  |  | $ | 37,182 |
Current state income tax expense |  | 4,297 |  |  | 5,072 |  |  | 5,008 |
Total current tax expense |  | 14,194 |  |  | 30,363 |  |  | 42,190 |
Deferred federal income tax (benefit) expense |  | 2,823 |  |  | (2,966) |  |  | 3,532 |
Deferred state income tax (benefit) expense |  | (222) |  |  | (411) |  |  | 3,028 |
Total deferred tax (benefit) expense |  | 2,601 |  |  | (3,377) |  |  | 6,560 |
Total income tax expense |  | $ | 16,795 |  |  | $ | 26,986 |  |  | $ | 48,750 |
The Company had net deferred tax assets (deferred tax assets in excess of deferred tax liabilities) of $91.5 million and $86.6 million for the years ended at December 31, 2024 and 2023, respectively, which related primarily to our unrealized losses on securities, allowance for credit losses, and loan origination fees. Management believes it is more likely than not that all of the deferred tax assets will be realized with the exception of certain state net operating losses. Temporary timing differences between the amounts reported in the Consolidated Financial Statements and the tax bases of assets and liabilities result in deferred taxes. The table below summarizes significant components of our deferred tax assets and liabilities as of December 31, 2024 and 2023:
(dollars in thousands) |  | 2024 |  | 2023
Deferred tax assets |  |  |  |
Allowance for credit losses |  | $ | 27,998 |  |  | $ | 21,281 |
Deferred loan fees and costs |  | 4,551 |  |  | 6,372 |
Unrealized loss on securities available-for-sale |  | 34,656 |  |  | 39,671 |
Unrealized loss on securities held-to-maturity |  | 10,160 |  |  | 11,725 |
LIHTC and ITC Tax Credits |  | 5,793 |  |  | — |
Leases |  | 5,774 |  |  | 5,713 |
Supplemental executive retirement and death benefit agreements |  | 2,075 |  |  | 2,066 |
Stock-based compensation |  | 1,785 |  |  | 2,003 |
Premises and equipment |  | 217 |  |  | — |
Unrealized loss on interest rate swap derivatives |  | — |  |  | 59 |
Net operating loss |  | 8,104 |  |  | 7,964 |
Other assets |  | 3,549 |  |  | 2,669 |
Gross deferred tax assets |  | 104,662 |  |  | 99,523 |
Valuation allowances |  | (7,715) |  |  | (7,428) |
Total deferred tax assets |  | 96,947 |  |  | 92,095 |
Deferred tax liabilities |  |  |  |
Leases |  | (4,483) |  |  | (4,703) |
Interest Rate Swaps & Derivatives |  | (602) |  |  | — |
Excess servicing |  | — |  |  | (561) |
Premises and equipment |  | — |  |  | (211) |
Other liabilities |  | (390) |  |  | — |
Total deferred tax liabilities |  | (5,475) |  |  | (5,475) |
Net deferred income tax assets |  | $ | 91,472 |  |  | $ | 86,620 |
As of December 31, 2024. the Company has $2.2 million of federal net operating loss carryforward in conjunction with the Fidelity & Trust Financial Corporation acquisition, that is subject to annual limits under Section 382 of the Internal Revenue Code and expires in 2027. The Company has concluded, based on the weight of available positive and negative evidence, a portion of its state net operating loss deferred tax asset is not more likely than not to be realized and accordingly, a valuation allowance of $7.7 million and $7.4 million is carried as of December 31, 2024 and 2023, respectively. A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate for the years ended December 31, 2024, 2023 and 2022 follows:
|  | Year Ended December 31,
|  | 2024 |  | 2023 |  | 2022
Statutory federal income tax rate |  | 21.00 | % |  | 21.00 | % |  | 21.00 | %
Increase (decrease) due to: |  |  |  |  |  |
State income taxes |  | (10.53) | % |  | 2.75 | % |  | 3.28 | %
Goodwill Impairment |  | (72.34) | % |  | — | % |  | — | %
Tax credits, net of amortization (1) |  | 11.37 | % |  | (1.32) | % |  | (0.80) | %
Tax-exempt interest and dividend income |  | 4.39 | % |  | (1.75) | % |  | (0.85) | %
Bank owned life insurance |  | 2.00 | % |  | (0.58) | % |  | (0.33) | %
Stock-based compensation expense |  | (3.07) | % |  | 0.22 | % |  | (0.08) | %
Change in unrecognized tax benefits |  | (3.63) | % |  | — | % |  | — | %
Return to provision and prior period adjustments |  | (3.83) | % |  | (0.24) | % |  | 1.33 | %
Non-deductible fines and penalties |  | — | % |  | — | % |  | 2.54 | %
Other |  | (0.90) | % |  | 1.08 | % |  | (0.39) | %
Effective tax rate |  | (55.54) | % |  | 21.16 | % |  | 25.70 | %
(1) Includes low income housing tax credit proportional amortization expense, net of tax of $5.7 million, $5.4 million and $5.3 million, in 2024, 2023 and 2022 respectively. Unrecognized tax benefits ("UTBs") for the years ended December 31, 2024, 2023, and 2022, were $6.6 million, $0 and $0, respectively. The following table details the change in unrecognized tax benefits ("UTBs") for 2024:
|  | Year Ended December 31,
(dollars in thousands) |  | 2024 |  |  |  |
Balance at beginning of year |  | $ | — |  |  |  |  |
Gross increases - tax positions related to prior periods |  | 6,254 |  |  |  |  |
Gross decreases - tax positions related to prior periods |  | — |  |  |  |  |
Gross increases - tax positions related to the current period |  | 296 |  |  |  |  |
Settlements with tax authorities |  | — |  |  |  |  |
Lapse of statute of limitations |  | — |  |  |  |  |
Balance at end of year |  | $ | 6,550 |  |  |  |  |
Included in the balance of UTBs as of December 31, 2024, 2023, and 2022, are $4.1 million, $0, and $0, respectively, of tax benefits that, if recognized, would affect the ETR. Also, included in the balance of UTBs are some items the recognition of which would not affect the effective tax rate, such as the tax effect of certain temporary differences, the portion of gross state UTBs that would be offset by the tax benefit of the associated federal deduction. We recognize interest accrued related to UTBs and penalties in other noninterest expense. We accrued no penalties and interest of $0.2 million during 2024 and in total, as of December 31, 2024. It is reasonably possible that a decrease of up to $5.2 million in UTBs related to state exposures may be necessary within the next 12 months, since resolved items will be removed from the balance whether their resolution results in refund or recognition. The Company’s federal income tax returns are open and subject to examination from the 2021 tax return year and forward. The Company’s state income tax returns are generally open from the 2020 and later tax return years based on individual state statutes of limitations. There are currently no examinations in process as of December 31, 2024.

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