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PROVISION FOR INCOME TAXES
 6 Months Ended
Jun. 30, 2026
Income Tax Disclosure [Abstract]  
PROVISION FOR INCOME TAXES PROVISION FOR INCOME TAXES
The income tax provision differs from the amount computed by applying the statutory federal income tax rate to income before taxes. The Company ordinarily generates an annual effective tax rate that differs from the statutory rate of 21% due to benefits
resulting from tax-exempt interest, tax-exempt income from bank-owned life insurance (“BOLI”), and tax benefits resulting from certain partnership investments.
Three Months Ended June 30,Six Months Ended June 30,
2026202520262025
(Dollars in Thousands)AmountPercentAmountPercentAmountPercentAmountPercent
U. S. Federal Statutory Rate$7,821 21.0 $2,232 21.0 $30,927 21.0 $4,571 21.0 
State and Local Income Taxes, Net of Federal Income Tax Effect1
2,025 5.4 130 1.2 3,511 2.4 391 1.8 
Tax Credits
Rehabilitation Tax Credits, Net of Basis Reduction2 — (157)(1.5)2 — (309)(1.4)
Tax Credit Investment Amortization, Net of Federal Benefits23 0.1 128 1.2 68 — 256 1.2 
Change in Valuation Allowance(869)(2.3)(8)(0.1)(824)(0.6)23 0.1 
Nontaxable or Nondeductible Items
Tax-Exempt Interest, Net of Disallowance(168)(0.5)(114)(1.1)(271)(0.2)(231)(1.1)
Income From Bank Owned Life Insurance(90)(0.2)(71)(0.7)(175)(0.1)(538)(2.4)
Other Adjustments
Interim Period Effective Rate Adjustment(304)(0.8)(27)(0.3)(558)(0.4)154 0.7 
Other(113)(0.3)5 0.2 (79)— (16)(0.1)
Income Tax Provision and Effective Income Tax Rate$8,327 22.4 $2,118 19.9 $32,601 22.1 $4,301 19.8 
1For the three and six months ended June 30, 2026 and 2025, North Carolina comprised the majority (greater than 50%) of the tax effect in this category.
For the three and six months ended June 30, 2026, the Company recorded income tax provision of $8.3 million and $32.6 million, respectively, reflecting effective tax rates of 22.4% and 22.1%, compared to income tax provisions of $2.1 million and $4.3 million and effective tax rates of 19.9% and 19.8%, respectively, for the same periods in 2025. The effective tax rates for the 2026 periods exceeded the federal statutory rate of 21%, primarily due to state income taxes and the expiration of certain tax credits associated with historic tax credit investments. These items were partially offset by the tax benefits associated with tax-exempt interest income, BOLI income and rehabilitation tax credits. The lower effective tax rates for the comparable 2025 periods were primarily attributable to the recognition of a $1.9 million tax-free BOLI death benefit, which favorably impacted the Company’s annual effective tax rate.
The Company elected to adopt the proportional amortization method of accounting for all qualifying equity investments within the historic tax credit (“HTC”) program. The Company makes equity investments as a limited partner in various partnerships that sponsor HTC as a strategic tax initiative designed to receive income tax credits and other income tax benefits, such as deductible flow-through losses. As of June 30, 2026 and December 31, 2025, the Company recognized $0.3 million and $0.5 million, respectively, in HTC equity investments recorded as a component of other assets on the Consolidated Balance Sheets.
The Company records income tax credits and other income tax benefits received from its HTC investments as a component of the income tax provision on the Consolidated Statements of Income and as a component of operating activities on the Consolidated Statements of Cash Flows.
Investments accounted for using the proportional amortization method are amortized and recorded as a component of the income tax provision on the Consolidated Statements of Income.
The Company records non-income-tax-related activity and other returns received from its HTC investments as a component of other noninterest income on the Consolidated Statements of Income and as a component of operating activities on the Consolidated Statements of Cash Flows. As of June 30, 2026 and June 30, 2025, the Company had not recognized any non-income-tax-related activity from its HTC investments.