Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax expense (benefit) for the years ended December 31, 2023, 2022 and 2021 is summarized as follows:

	Years Ended December 31,
(In thousands)	2023		2022		2021
Current income taxes:
Federal	$	165,518	$	116,976	$	118,723
State	62,948		48,633		48,847
Foreign	13,696		3,207		6,936
Total current income taxes	$	242,162	$	168,816	$	174,506
Deferred income taxes:
Federal	$	(8,245)	$	18,560	$	794
State	(9,750)		(1,183)		(3,597)
Foreign	(1,712)		4,680		(58)
Total deferred income taxes	$	(19,707)	$	22,057	$	(2,861)
Total income tax expense	$	222,455	$	190,873	$	171,645

The Company’s income before income taxes in 2023, 2022 and 2021 includes $42.5 million, $27.7 million and $23.1 million, respectively, of foreign income attributable to its Canadian subsidiary.

The tax effects of certain transactions are recorded directly to shareholders’ equity rather than income tax expense. The tax effect of fair value adjustments on securities available-for-sale and derivative instruments in cash flow hedges are recorded directly to shareholders’ equity as part of other comprehensive income (loss) and are reflected on the Consolidated Statements of Comprehensive Income. The tax effect of unrealized gains and losses on certain foreign currency transactions is also recorded in shareholders’ equity as part of other comprehensive income (loss).

A reconciliation of the differences between taxes computed using the statutory Federal income tax rate and actual income tax expense is as follows:

	Years Ended December 31,
(Dollars in thousands)	2023		2022		2021
Income tax expense using the statutory Federal income tax rate of 21% on income before taxes	$	177,467	$	147,117	$	133,937
Increase (decrease) in tax resulting from:
Tax-exempt interest, net of interest expense disallowance	(5,348)		(3,936)		(2,605)
State taxes, net of federal tax benefit	42,027		37,328		35,747
Income earned on bank owned life insurance	(1,013)		(102)		(1,169)
Excess tax benefits on share based compensation	(2,314)		(2,278)		(1,906)
Meals, entertainment and related expenses	2,439		1,506		1,208
FDIC insurance expense	7,713		6,014		5,676
Non-deductible compensation expense	2,147		2,361		1,799
Foreign subsidiary, net	3,060		2,376		2,011
Tax benefits related to tax credits, net	(3,632)		(338)		(1,145)
Other, net	(91)		825		(1,908)
Income tax expense	$	222,455	$	190,873	$	171,645

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2023 and 2022 are as follows:

(In thousands)	2023		2022
Deferred tax assets:
Net unrealized losses on securities included in other comprehensive income	$	126,155	$	140,002
Allowance for credit losses	113,105		95,389
Right-of-use liability	43,693		44,277
Deferred compensation	25,369		26,411
Stock-based compensation	13,762		11,196
FDIC special assessment	9,092		—
Federal net operating loss carryforward	697		1,003
Other	4,930		6,191
Total gross deferred tax assets	336,803		324,469
Deferred tax liabilities:
Equipment leasing	165,806		138,198
Capitalized servicing rights	49,857		59,928
Right-of-use asset	36,249		36,484
Premises and equipment	35,288		51,058
Goodwill and intangible assets	16,019		12,636
Net unrealized gains on derivatives included in other comprehensive income	11,516		2,364
Deferred loan fees and costs	7,434		5,061
Other	2,652		1,387
Total gross deferred tax liabilities	324,821		307,116
Net deferred tax assets	$	11,982	$	17,353

Management has determined that a valuation allowance is not required for the deferred tax assets at December 31, 2023 because it is more likely than not that these assets could be realized through future reversals of existing taxable temporary differences, tax planning strategies and future taxable income. This conclusion is based on the Company’s historical earnings, its current level of earnings and prospects for continued growth and profitability.

The Company has Federal net operating loss (“NOL”) carryforwards of $3.3 million that begin to expire in 2029 through 2037 and are subject to IRC Section 382 annual limitation. The NOL carryforwards were a result of acquisitions.

The Company accounts for uncertainties in income taxes in accordance with ASC 740, Income Taxes. At December 31, 2023, 2022, and 2021, the Company had no unrecognized tax benefits related to uncertain tax positions that, if recognized, would impact the effective tax rate. If the Company were to record interest or penalties associated with uncertain tax positions, the interest or penalties would be included in income tax expense. As of December 31, 2023, the Company does not expect the total amount of unrecognized tax benefits to significantly increase in the next 12 months.

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in numerous state jurisdictions and in Canada. In the ordinary course of business, we are routinely subject to audit by the taxing authorities of these jurisdictions. Currently, the Company’s U.S. federal income tax returns are open and subject to audit for the 2020 tax return year forward, and in general, the Company’s state income tax returns are open and subject to audit from the 2020 tax return year forward, subject to individual state statutes of limitation. The Company has extended the statute of limitations on certain state income tax returns for tax years 2015 through 2019 due to an ongoing audit. The Company’s Canadian subsidiary’s Canadian income tax returns are also subject to audit for the 2020 tax return year forward.