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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 Company files income tax returns in the U.S. federal jurisdiction and the State of Maryland. With few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years prior to 2021. The following table provides information on components of income tax expense for the years ended December 31, 2024 and 2023.
($ in thousands) |  | December 31, 2024 |  | December 31, 2023 |  |
Current tax expense: |  |  |  |  |  |
Federal |  | $ | 4,264 |  |  | $ | 172 |  |  |
State |  | 1,681 |  |  | 63 |  |  |
|  | 5,945 |  |  | 235 |  |  |
Deferred income tax expense: |  |  |  |  |  |
Federal |  | 6,570 |  |  | 1,692 |  |  |
State |  | 2,300 |  |  | 1,029 |  |  |
|  | 8,870 |  |  | 2,721 |  |  |
Total income tax expense |  | $ | 14,815 |  |  | $ | 2,956 |  |  |
The following table provides a reconciliation of tax computed at the statutory federal tax rate to the actual tax expense for the years ended December 31, 2024 and 2023.
|  | December 31, 2024 |  | December 31, 2023 |  |
Tax at federal statutory rate |  | 21.0 | % |  | 21.0 | % |  |
Tax effect of: |  |  |  |  |  |
Tax-exempt income |  | (1.4) |  |  | (3.6) |  |  |
State income taxes, net of federal benefit |  | 5.4 |  |  | 6.1 |  |  |
Bargain purchase gain |  | — |  |  | (13.1) |  |  |
Nondeductible compensation costs |  | 0.1 |  |  | 3.9 |  |  |
Nondeductible merger-related expenses |  | — |  |  | 2.6 |  |  |
Other |  | 0.1 |  |  | 3.9 |  |  |
Actual income tax expense rate |  | 25.2 | % |  | 20.8 | % |  |
The following table provides information on significant components of the Company’s deferred tax assets and liabilities as of December 31, 2024 and 2023.
($ in thousands) |  | December 31, 2024 |  | December 31, 2023
Deferred tax assets: |  |  |  |
Allowance for credit losses |  | $ | 14,888 |  |  | $ | 14,534 |
Write-downs of OREO |  | — |  |  | 33 |
Nonaccrual loan interest |  | 578 |  |  | 344 |
Lease liabilities |  | 3,035 |  |  | 3,326 |
Deferred compensation |  | 4,078 |  |  | 4,160 |
Federal net operating loss |  | — |  |  | 6,528 |
State net operating loss |  | 2,066 |  |  | 2,448 |
Deferred loan fees |  | 2,078 |  |  | 1,775 |
Acquisition fair value adjustments |  | 24,988 |  |  | 30,452 |
Unrealized losses on available for sale securities |  | 2,844 |  |  | 2,825 |
Other |  | 1,233 |  |  | 1,398 |
Total deferred tax assets |  | 55,788 |  |  | 67,823 |
Deferred tax liabilities: |  |  |  |
Depreciation |  | 4,115 |  |  | 4,320 |
Right-of-use assets |  | 2,918 |  |  | 3,229 |
Mortgage servicing rights |  | 1,505 |  |  | 1,541 |
Acquisition fair value adjustments |  | 1,651 |  |  | 2,401 |
Intangibles |  | 11,223 |  |  | 13,611 |
Other |  | 575 |  |  | 999 |
Total deferred tax liabilities |  | 21,987 |  |  | 26,101 |
Less: valuation allowance |  | $ | (1,944) |  |  | $ | (1,015) |
Net deferred tax assets |  | $ | 31,857 |  |  | $ | 40,707 |
Management of the Company has determined a full valuation allowance is required for the holding company’s state deferred tax assets, largely associated with its state net operating losses. As the holding company files in the state of Maryland on separate entity basis and has not had and does not expect to have taxable income in that jurisdiction for the foreseeable future, the Company believes, at the current and prior period end, it was more likely than not that the holding company’s state deferred tax assets will not be realized. This valuation allowance increased from $1.0 million to $1.9 million during the year ended December 31, 2024. Based on the Company’s analysis, no other valuation allowances have been recorded as the Company expects to realize its remaining federal and state deferred tax assets. The Company has analyzed the tax positions taken or expected to be taken in its income tax returns for the periods ending December 31, 2024 and 2023, and has recorded no liabilities related to uncertain tax positions in accordance with the applicable guidance in ASC 740, Income Taxes.

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