XML 32 R19.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The current and deferred components of the income tax provision for each of the three years ended December 31 are as follows:
(in thousands)202320222021
Current tax provision
Federal$3,234 $10,670 $6,627 
State2,823 6,687 4,815 
Total current tax provision6,057 17,357 11,442 
Deferred tax provision (benefit)
Federal319 (441)274 
State(235)7 (58)
Total deferred tax provision (benefit)
84 (434)216 
Total income tax provision$6,141 $16,923 $11,658 
The following table shows the tax effect of our cumulative temporary differences as of December 31:
(in thousands)20232022
Deferred tax assets:
Net unrealized losses on securities available-for-sale$20,993 $29,458 
Allowance for credit losses on loans and unfunded loan commitments7,775 7,229 
Operating and finance lease liabilities6,860 8,002 
Deferred compensation and salary continuation plans3,289 3,481 
Accrued but unpaid expenses1,709 1,751 
Net operating loss carryforwards1,136 1,239 
Fair value adjustment on acquired loans695 905 
Stock-based compensation632 697 
State franchise tax593 1,396 
Depreciation and disposals on premises and equipment179 236 
Other74 194 
  Total gross deferred tax assets43,935 54,588 
Deferred tax liabilities:
Operating and finance lease right-of-use assets(6,092)(7,465)
Deferred loan origination costs and fees(1,435)(1,476)
Core deposit intangible assets(1,113)(1,512)
Other(226)(279)
  Total gross deferred tax liabilities(8,866)(10,732)
Net deferred tax assets$35,069 $43,856 

As of December 31, 2023, California net operating loss carryforwards ("NOLs") of $13.3 million corresponded to the total $1.1 million deferred tax asset above. If not fully utilized, the California NOLs will begin to expire in 2031. Based upon the level of historical taxable income and projections for future taxable income over the periods during which the deferred tax assets are expected to be deductible, management believes it is more likely than not that we will realize the benefit of the remaining deferred tax assets. Accordingly, no valuation allowance has been established as of December 31, 2023 or 2022.

The effective tax rate for 2023, 2022 and 2021 differs from the current federal statutory income tax rate as follows:
202320222021
Federal statutory income tax rate21.0 %21.0 %21.0 %
Increase (decrease) due to:
California franchise tax, net of federal tax benefit7.9 %8.3 %8.4 %
Tax exempt interest on municipal securities and loans(3.1)%(1.9)%(2.5)%
Tax exempt earnings on bank owned life insurance(1.5)%(0.4)%(1.0)%
Non-deductible acquisition related expenses— %— %0.6 %
Non-deductible executive compensation— %— %0.4 %
Low income housing and qualified zone academy bond tax credits(0.6)%(0.2)%(0.4)%
Stock-based compensation and excess tax deficiencies (benefits)0.2 %— %(0.1)%
Other(0.3)%(0.2)%(0.4)%
Effective Tax Rate23.6 %26.6 %26.0 %

Bancorp and the Bank have entered into a tax allocation agreement, which provides that income taxes shall be allocated between the parties on a separate entity basis. The intent of this agreement is that each member of the consolidated group will incur no greater tax liability than it would have incurred on a stand-alone basis.

We file a consolidated return in the U.S. federal tax jurisdiction and a combined return in the State of California tax jurisdiction. There were no ongoing federal or state income tax examinations at the time of the issuance of this report. We are no longer subject to examinations by tax authorities for years before 2020 for federal income tax and before 2019 for California. At December 31, 2023 and 2022, there were no unrecognized tax benefits, and neither the Bank nor Bancorp had accruals for interest and penalties related to unrecognized tax benefits.