Income taxes

6 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income taxes

Income taxes:

An allocation of federal and state income taxes between current and deferred portions is presented below:

	Three Months Ended June 30,
	2021		2020
Current	$	9,541	$	15,747
Deferred	3,899		(8,292)
Total	$	13,440	$	7,455
	Six Months Ended June 30,
	2021		2020
Current	$	15,490	$	23,915
Deferred	13,538		(16,380)
Total	$	29,028	$	7,535

The following table presents a reconciliation of federal income taxes at the statutory federal rate of 21% to the Company's effective tax rates for the three and six months ended June 30, 2021 and 2020:

	Three Months Ended June 30,
	2021				2020
Federal taxes calculated at statutory rate	$	11,916	21.0	%	$	6,369	21.0	%
Increase (decrease) resulting from:
State taxes, net of federal benefit	1,879		3.3	%	1,298		4.3	%
(Benefit) expense from equity based compensation	(124)		(0.2)	%	22		0.1	%
Municipal interest income, net of interest disallowance	(419)		(0.7)	%	(310)		(1.0)	%
Bank owned life insurance	(82)		(0.1)	%	(17)		(0.1)	%
Merger and offering costs	127		0.2	%	32		0.1	%
Section 162(m) limitation	21		—	%	—		—	%
Other	122		0.2	%	61		0.2	%
Income tax expense, as reported	$	13,440	23.7	%	$	7,455	24.6	%
	Six Months Ended June 30,
	2021				2020
Federal taxes calculated at statutory rate	$	26,293	21.0	%	$	6,542	21.0	%
Increase (decrease) resulting from:
State taxes, net of federal benefit	3,629		2.9	%	1,166		3.7	%
(Benefit) expense from equity based compensation	(345)		(0.3)	%	161		0.5	%
Municipal interest income, net of interest disallowance	(843)		(0.7)	%	(574)		(1.8)	%
Bank owned life insurance	(166)		(0.1)	%	(35)		(0.1)	%
Merger and offering costs	127		0.1	%	163		0.5	%
Section 162(m) limitation	248		0.2	%	—		—	%
Other	85		0.1	%	112		0.4	%
Income tax expense, as reported	$	29,028	23.2	%	$	7,535	24.2	%

As of August 15, 2020, the Company acquired $8,346 of net operating losses from Franklin. The net operating loss carryforwards can be used to offset taxable income in future periods and reduce income tax liabilities in those future periods. While net operating losses are subject to certain annual utilization limits under IRC Section 382, the Company believes the net operating losses carryforward will be realized based on the projected annual limitation and the length of the net operating loss carryover period. The Company's determination of the realization of the net deferred tax asset is based on its assessment of all available positive and negative evidence. The net operating loss carryforward is set to expire as of December 31, 2029.

The Company is subject to Internal Revenue Code Section 162(m), which limits the deductibility of compensation of certain individuals. The restricted stock unit plans that existed prior to the corporation being public will have payments in 2021 after the reliance period defined in the Section 162 regulations. Under the limitations of IRC Section 162(m), the Company will not be able to realize the deferred tax asset established on certain restricted stock units granted to these

covered individuals. Therefore, a valuation allowance was established in the first quarter of 2021 for the Company's inability to take the benefit of the exercise of the restricted stock units. It is the Company’s policy to apply the IRC Section 162(m) limitations to stock based compensation first; therefore, the first quarter 2021 nondeductible IRC Section 162(m) expense was related to cash compensation and expense on the exercised restricted stock units that were above the limit as defined in IRC Section 162(m).

The components of the net deferred tax assets at June 30, 2021 and December 31, 2020, are as follows: 

	June 30,		December 31
	2021		2020
Deferred tax assets:
Allowance for credit losses	$	40,878	$	48,409
Operating lease liabilities	13,067		14,496
Federal net operating loss	1,753		1,753
Deferred compensation	8,572		8,872
Unrealized loss on cash flow hedges	364		499
Other	19,817		19,101
Subtotal	84,451		93,130
Deferred tax liabilities:
FHLB stock dividends	$	(561)	$	(561)
Operating leases - right of use assets	(11,831)		(13,197)
Depreciation	(7,088)		(7,491)
Amortization of core deposit intangibles	(349)		(684)
Unrealized gain on equity securities	(3,877)		(17)
Unrealized gain on debt securities	(5,987)		(13,027)
Mortgage servicing rights	(26,435)		(20,803)
Goodwill	(12,522)		(11,301)
Other	(9,828)		(9,653)
Subtotal	(78,478)		(76,734)
Net deferred tax assets	$	5,973	$	16,396