| Income Tax Disclosure [Text Block] |
NOTE 16. INCOME TAXES
The components of income tax expense are as follows:
| |
|
Year Ended December 31, |
|
| |
|
2023 |
|
|
2022 |
|
|
2021 |
|
| |
|
(In Thousands) |
|
| Current tax expense: |
|
|
|
|
|
|
|
|
|
|
|
|
| Federal |
|
$ |
35,124 |
|
|
$ |
56,318 |
|
|
$ |
45,248 |
|
| State |
|
|
3,616 |
|
|
|
3,621 |
|
|
|
5,428 |
|
| Total current tax expense |
|
|
38,740 |
|
|
|
59,939 |
|
|
|
50,676 |
|
| Deferred tax (benefit) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
| Federal |
|
|
(1,057 |
) |
|
|
(4,110 |
) |
|
|
(5,596 |
) |
| State |
|
|
52 |
|
|
|
1,495 |
|
|
|
535 |
|
| Total deferred tax (benefit) |
|
|
(1,005 |
) |
|
|
(2,615 |
) |
|
|
(5,061 |
) |
| Total income tax expense |
|
$ |
37,735 |
|
|
$ |
57,324 |
|
|
$ |
45,615 |
|
The Company’s total income tax expense differs from the amounts computed by applying the Federal income tax statutory rates to income before income taxes. A reconciliation of the differences is as follows:
| |
|
Year Ended December 31, 2023 |
|
| |
|
Amount |
|
|
% of Pre-tax Earnings |
|
| |
|
(In Thousands) |
|
| Income tax at statutory federal rate |
|
$ |
51,363 |
|
|
|
21.00 |
% |
| Effect on rate of: |
|
|
|
|
|
|
|
|
| State income tax, net of federal tax effect |
|
|
3,339 |
|
|
|
1.37 |
% |
| Tax-exempt income, net of expenses |
|
|
(92 |
) |
|
|
(0.04 |
)% |
| Bank-owned life insurance contracts |
|
|
(1,591 |
) |
|
|
(0.65 |
)% |
| Excess tax benefit from stock compensation |
|
|
(1,242 |
) |
|
|
(0.51 |
)% |
| Federal tax credits, net of related amortization |
|
|
(16,002 |
) |
|
|
(6.54 |
)% |
| Other |
|
|
1,960 |
|
|
|
0.80 |
% |
| Effective income tax and rate |
|
$ |
37,735 |
|
|
|
15.43 |
% |
| |
|
Year Ended December 31, 2022 |
|
| |
|
Amount |
|
|
% of Pre-tax Earnings |
|
| |
|
(In Thousands) |
|
| Income tax at statutory federal rate |
|
$ |
64,796 |
|
|
|
21.00 |
% |
| Effect on rate of: |
|
|
|
|
|
|
|
|
| State income tax, net of federal tax effect |
|
|
7,247 |
|
|
|
2.35 |
% |
| Tax-exempt income, net of expenses |
|
|
(188 |
) |
|
|
(0.06 |
)% |
| Bank-owned life insurance contracts |
|
|
(1,812 |
) |
|
|
(0.59 |
)% |
| Excess tax benefit from stock compensation |
|
|
(1,091 |
) |
|
|
(0.35 |
)% |
| Federal tax credits, net of related amortization |
|
|
(11,131 |
) |
|
|
(3.61 |
)% |
| Other |
|
|
(497 |
) |
|
|
(0.16 |
)% |
| Effective income tax and rate |
|
$ |
57,324 |
|
|
|
18.58 |
% |
| |
|
Year Ended December 31, 2021 |
|
| |
|
Amount |
|
|
% of Pre-tax Earnings |
|
| |
|
(In Thousands) |
|
| Income tax at statutory federal rate |
|
$ |
53,203 |
|
|
|
21.00 |
% |
| Effect on rate of: |
|
|
|
|
|
|
|
|
| State income tax, net of federal tax effect |
|
|
4,952 |
|
|
|
1.95 |
% |
| Tax-exempt income, net of expenses |
|
|
(242 |
) |
|
|
(0.10 |
)% |
| Bank-owned life insurance contracts |
|
|
(1,395 |
) |
|
|
(0.55 |
)% |
| Excess tax benefit from stock compensation |
|
|
(2,335 |
) |
|
|
(0.92 |
)% |
| Federal tax credits |
|
|
(11,019 |
) |
|
|
(4.35 |
)% |
| Other |
|
|
2,451 |
|
|
|
0.97 |
% |
| Effective income tax and rate |
|
$ |
45,615 |
|
|
|
18.00 |
% |
The components of net deferred tax asset are as follows:
| |
|
December 31, |
|
| |
|
2023 |
|
|
2022 |
|
| |
|
(In Thousands) |
|
| Deferred tax assets: |
|
|
|
|
|
|
|
|
| Allowance for credit losses |
|
$ |
38,483 |
|
|
$ |
36,720 |
|
| Other real estate owned |
|
|
253 |
|
|
|
316 |
|
| Nonqualified equity awards |
|
|
1,354 |
|
|
|
1,229 |
|
| Nonaccrual interest |
|
|
327 |
|
|
|
289 |
|
| State tax credits carryforward |
|
|
2,011 |
|
|
|
1,795 |
|
| Deferred loan fees |
|
|
3,806 |
|
|
|
4,720 |
|
| Reserve for unfunded commitments |
|
|
144 |
|
|
|
144 |
|
| Accrued bonus |
|
|
3,052 |
|
|
|
4,540 |
|
| Capital loss carryforward |
|
|
1,648 |
|
|
|
1,889 |
|
| Lease liability |
|
|
6,886 |
|
|
|
4,923 |
|
| Deferred revenue |
|
|
8 |
|
|
|
20 |
|
| Net unrealized loss on securities available for sale |
|
|
18,129 |
|
|
|
16,339 |
|
| Other deferred tax assets |
|
|
2,323 |
|
|
|
60 |
|
| Total deferred tax assets |
|
|
78,424 |
|
|
|
72,984 |
|
| |
|
|
|
|
|
|
|
|
| Deferred tax liabilities: |
|
|
|
|
|
|
|
|
| Depreciation |
|
|
4,289 |
|
|
|
4,431 |
|
| Prepaid expenses |
|
|
735 |
|
|
|
975 |
|
| Investments |
|
|
1,484 |
|
|
|
1,054 |
|
| Right-of-use assets and other leasing transactions |
|
|
6,639 |
|
|
|
4,723 |
|
| Other deferred tax liabilities |
|
|
2,359 |
|
|
|
1,353 |
|
| Total deferred tax liabilities |
|
|
15,506 |
|
|
|
12,536 |
|
| Net deferred tax assets |
|
$ |
62,918 |
|
|
$ |
60,448 |
|
The Company believes its net deferred tax asset is recoverable as of December 31, 2023 and 2022 based on the expectation of future taxable income and other relevant considerations.
Pursuant to ASC 740-10-30-2 Income Taxes, deferred tax assets and liabilities are measured using enacted tax rates applicable to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company and its subsidiaries file a consolidated U.S. Federal income tax return and various consolidated and separate company state income tax returns. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2020 through 2023. The Company is also currently open to audit by several state departments of revenue for the years ended December 31, 2020 through 2023. The audit periods differ depending on the date the Company began business activities in each state.
Accrued interest and penalties on unrecognized income tax benefits totaled $450,000 and $0 as of December 31, 2023 and 2022, respectively. Interest and penalties related to unrecognized income tax benefits are recorded in the provision for income taxes. The Company has $1,653,000 of unrecognized tax benefits (net of the federal benefit on state income tax issues) recorded as of December 31, 2023. Unrecognized income tax benefits as of December 31, 2023, and December 31, 2022, that, if recognized, would impact the effective income tax rate totaled $1,653,000 and $0 (net of the federal benefit on state income tax issues), respectively.
The following table presents a summary of the changes during 2023, 2022 and 2021 in the amount of unrecognized tax benefits that are included in the consolidated balance sheets.
| |
|
2023 |
|
|
2022 |
|
|
2021 |
|
| |
|
(In Thousands) |
|
| Balance, beginning of year |
|
$ |
- |
|
|
$ |
3,659 |
|
|
$ |
3,238 |
|
| Increases related to prior year tax positions |
|
|
1,285 |
|
|
|
- |
|
|
|
864 |
|
| Decreases related to prior year tax positions |
|
|
- |
|
|
|
(2,860 |
) |
|
|
- |
|
| Increases related to current year tax positions |
|
|
807 |
|
|
|
- |
|
|
|
- |
|
| Settlements |
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Lapse of statute |
|
|
- |
|
|
|
(799 |
) |
|
|
(443 |
) |
| Balance, end of year |
|
$ |
2,092 |
|
|
$ |
- |
|
|
$ |
3,659 |
|
|