Income Taxes (Tables)

12 Months Ended

Dec. 31, 2023

The components of income tax expense were as follows:


	For the Year Ended December 31,
	2023		2022		2021
	(dollars in thousands)
Current income tax expense
Federal	$	7,740	$	12,906	$	11,330
State		2,895		5,559		4,862
Total current income tax expense		10,635		18,465		16,192

Deferred income tax expense
Federal		1,091		455		1,840
State		574		132		1,059
Total deferred income tax expense		1,665		587		2,899
Total income tax expense	$	12,300	$	19,052	$	19,091

Reconciliation of Total Income Tax Expense, Calculated at Statutory Federal Income Tax Expense in Consolidated Statements of Income

The following is a reconciliation of the total income tax expense, calculated at statutory federal income tax rates, to the income tax provision in the consolidated statements of income:


	For the Year Ended December 31,
	2023			2022			2021
	(dollars in thousands)
Income tax expense at statutory rate of 21.0%	$	9,746		$	15,112		$	15,354
Increase/(decrease) resulting from:
State tax, net of federal tax benefit		2,741			4,496			4,678
Tax-exempt income		(597	)		(814	)		(795	)
ESOP dividends		(151	)		(150	)		(145	)
Bank owned life insurance		(148	)		(133	)		(165	)
Compensation limited under 162(m)		112			193			226
Benefit from stock compensation		17			(81	)		(46	)
Non-deductible acquisition costs		657			182			—
Non-deductible expenses		71			44			55
BOLI surrender, death benefit		—			310			—
Other		(148	)		(107	)		(71	)
Total income tax expense	$	12,300		$	19,052		$	19,091

Summary of Net Deferred Tax Asset

The Company’s 2023 and 2022 net deferred tax assets were measured using a 27.95% federal and state blended tax rate, respectively, and consisted of the following components:


	December 31, 2023			December 31, 2022
	(dollars in thousands)
Gross deferred tax assets
Allowance for credit losses	$	11,377		$	11,142
Unrealized losses on available for sale securities		6,652			7,390
Incentive compensation		1,379			1,819
Equity based compensation		910			1,298
Lease liabilities		7,033			7,661
ESOP dividends		202			200
Intangibles and fair value marks (merger related)		1,841			2,322
Other		528			931
Total gross deferred tax assets		29,922			32,763

Gross deferred tax liabilities
Deferred loan origination costs		(2,835	)		(2,886	)
Retirement benefits		(2,460	)		(1,745	)
Depreciation of premises and equipment		(2,353	)		(2,551	)
Right-of-use asset		(6,493	)		(7,014	)
Mortgage servicing rights		(411	)		(465	)
Goodwill		(115	)		(115	)
Derivative transactions		44			3
Total gross deferred tax liabilities		(14,623	)		(14,773	)
Net deferred tax asset	$	15,299		$	17,990

Summary of the Change in Net Deferred Tax Asset

A summary of the change in the net deferred tax asset is as follows:


	For the Year Ended December 31,
	2023			2022

Balance at beginning of year:	$	17,990		$	9,985
Deferred tax expense		(1,665	)		(587	)
Merger accounting		—			1,853
Accumulated other comprehensive income		(1,026	)		6,739
Balance at end of year	$	15,299		$	17,990

CAMBRIDGE BANCORP 10-K