v3.25.2
INCOME TAXES
12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The components of income taxes for the years ended December 31, 2024, 2023 and 2022 were as follows:
(dollars in thousands)2024
2023
(Restated)
2022
(Restated)
Federal:
Current$13,592 $25,420 $25,270 
Deferred(6,249)(5,805)(2,201)
State:
Current(201)9,296 11,986 
Deferred1,714 (2,104)(3,906)
Total income tax expense$8,856 $26,807 $31,149 
The Company’s income tax expense differed from the statutory federal rate of 21% for the years ended December 31, 2024, 2023 and 2022 as follows:
(dollars in thousands)2024
2023
(Restated)
2022
(Restated)
Expected income taxes$9,849 $18,472 $27,591 
Less income tax effect of:
Tax-exempt income, net(2,116)(1,762)(2,014)
State tax, net of federal benefit1,192 5,666 6,372 
Equity-based compensation benefit(120)(21)(186)
Surrender of company-owned life insurance policies— 3,756 — 
Valuation allowance44 69 58 
Other627 (672)
Actual income tax expense$8,856 $26,807 $31,149 
Deferred tax assets, net in the accompanying consolidated balance sheets at December 31, 2024 and 2023 include the following amounts of deferred tax assets and liabilities:
(dollars in thousands)2024
2023
(Restated)
Assets:
Allowance for credit losses on loans$29,191 $43,016 
Deferred compensation2,050 2,108 
Loans877 1,069 
Tax credits8,796 580 
Unrealized loss on securities28,547 26,022 
Unrealized loss on derivatives504 2,280 
Net operating losses7,290 8,090 
Operating lease liabilities2,654 2,521 
Other, net6,644 2,826 
Deferred tax assets86,553 88,512 
Valuation allowance(287)(244)
Deferred tax assets, net of valuation allowance86,266 88,268 
Liabilities:
Premises and equipment1,177 786 
Mortgage servicing rights3,524 3,870 
Fair value adjustment on trust preferred debentures3,593 3,853 
Deferred loan costs, net of fees1,457 2,410 
Intangible assets2,783 3,577 
Leased equipment15,981 23,824 
Operating lease right-of-use assets2,318 2,072 
Other, net7,414 5,142 
Deferred tax liabilities38,247 45,534 
Deferred tax assets, net$48,019 $42,734 
At December 31, 2024 and 2023, the accumulation of the prior year’s earnings representing tax bad debt deductions was approximately $3.1 million for both years. If these tax bad debt reserves were charged for losses other than bad debt losses, the Company would be required to recognize taxable income in the amount of the charge. It is not expected that such tax-restricted retained earnings will be used in a manner that would create federal income tax liabilities.
The Company had $29.7 million of federal net operating loss carryforwards expiring 2025 through 2035, $13.3 million of Illinois post-apportioned net operating loss carryforwards expiring 2029 and 2030, $29.7 million of Missouri pre-apportioned net operating loss carryforwards expiring 2025 through 2035, and $5.2 million of other state net operating loss carryforwards expiring 2029 through 2044, at December 31, 2024. The utilization of the federal and Missouri net operating losses are subject to the limitations of Internal Revenue Code Section 382. The utilization of the Illinois net operating loss is limited to $100,000 per year for years 2021 through 2023 and $500,000 in 2024, and years under which net operating losses are suspended do not count toward the number of carryforward years.
The Company has state tax credit carryforwards of $0.9 million with a five year carryforward period, expiring between 2025 and 2029. Any amounts that are expected to expire before being fully utilized have been accounted for through a valuation allowance as discussed below.
The deferred tax asset associated with the unrealized losses on securities is mainly a result of changes in interest rates, and the unrealized losses are considered to be temporary as the fair value is expected to recover as the securities approach their respective maturity dates.
We had no unrecognized tax benefits as of December 31, 2024 and 2023, and did not recognize any increase of unrecognized benefits during 2024 relative to any tax positions taken during the year.
Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is our policy to record such accruals in other income or expense; no such accruals existed as of December 31, 2024 and 2023.
Future realization of the tax benefit of an existing deductible temporary difference or carryforward ultimately depends on the existence of sufficient taxable income of the appropriate character within the carryback or carryforward period available under the tax law. All available evidence, both positive and negative, should be considered to determine whether, based on the weight of that evidence, a valuation allowance is needed. At December 31, 2024, the Company concluded, based on all available evidence, a valuation allowance was needed for the Company’s deferred tax asset related to capital loss carry forwards. An addition was made to the $244,000 valuation allowance from December 31, 2023 in the amount of $43,000, resulting in a valuation allowance of $287,000 at December 31, 2024 for the estimated capital losses that will not be able to be utilized in the future. For the Company's remaining deferred tax assets, based on our taxpaying history and estimates of taxable income over the years in which the items giving rise to the deferred tax assets are deductible, management believes it is more likely than not that we will realize the benefits of these deductible differences.
The Company is subject to U.S. federal income tax as well as income tax of various states. Years that remain open for potential review by the Internal Revenue Service are 2021 through 2023 and by state taxing authorities are 2020 through 2023.