Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Schedule of Components of Income Tax Expense (Benefit)

The components of income tax expense (benefit) included in the consolidated statements of income for the years ended December 31, 2018, 2017, and 2016 are presented below:



(in thousands)	2018		2017			2016
Current
Federal	$	75,582	$	(32,341	)	$	7,329
State	7,081		5,949			5,501
Total current income tax expense (benefit)	82,663		(26,392		)	12,830
Deferred
Federal	24,894		229,917			117,463
State	11,321		1,139			11,374
Total deferred income tax expense	36,215		231,056			128,837
Total income tax expense	$	118,878	$	204,664		$	141,667

Schedule of Effective Income Tax Rate Reconciliation

Income tax expense as shown in the consolidated statements of income differed from the amounts computed by applying the U.S. federal income tax rate of 21 percent to income before income taxes for the year ended December 31, 2018, and 35 percent for the years ended 2017 and 2016. A reconciliation of the differences is presented below:



	Years Ended December 31,
(dollars in thousands)	2018			2017			2016
Income tax expense at statutory federal income tax rate	$	114,944		$	168,048		$	135,957
Increase (decrease) resulting from:
State income tax expense, net of federal income tax benefit	17,270			11,961			13,256
Adjustment related to reduction in U.S. federal statutory income tax rate⁽¹⁾⁽²⁾	(9,865		)	46,573			—
Non-deductible expenses	7,556			2,435			813
Low income housing tax credits and other tax benefits	(6,421		)	(2,759		)	—
Low income housing tax credit amortization	5,316			268			—
Change in valuation allowance⁽³⁾	(3,431		)	(6,227		)	(2,055		)
Bank-owned life insurance	(3,055		)	(4,702		)	(3,402		)
Excess tax benefit from share-based compensation	(2,801		)	(4,318		)	—
General business tax credits⁽⁴⁾	(1,163		)	(4,615		)	(1,213		)
Other, net	528			(2,000		)	(1,689		)
Total income tax expense	$	118,878		$	204,664		$	141,667
Effective tax rate	21.7		%	42.6		%	36.5		%

⁽¹⁾ Does not include a 2017 provisional tax expense adjustment of $608 thousand which is included as a component of the change in the valuation allowance. The 2017 income tax effect of the provisional federal income tax expense of $47.2 million relating to Federal Tax Reform represents 9.8% of income before taxes.

⁽²⁾ 2017 includes a $7.6 million expense from remeasurement of deferred tax assets relating to unrealized losses on available for sale securities which were initially recorded through accumulated other comprehensive income (AOCI). As further described in Note 1, ASU 2018-02, issued in February 2018, provides for the reclassification of the tax effects stranded in AOCI resulting from Federal Tax Reform to retained earnings. As a result, Synovus elected to apply the ASU 2018-02 guidance during the reporting period ending on March 31, 2018 and reclassified $7.6 million from AOCI to retained earnings.

⁽³⁾ 2017 includes provisional federal income tax expense of $608 thousand related to Federal Tax Reform.

⁽⁴⁾ 2017 includes research and development tax credits for the tax years 2013-2017 totaling $4.6 million.

Schedule of Deferred Tax Assets and Liabilities

Details for significant portions of the deferred tax assets and liabilities at December 31, 2018 and 2017 are presented below:



(in thousands)	2018			2017
Deferred tax assets
Allowance for loan losses	$	63,952		$	66,034
Net operating loss carryforwards	33,008			41,059
Net unrealized losses on investment securities available for sale	24,419			13,253
Employee benefits and deferred compensation	20,363			18,333
Tax credit carryforwards	20,088			19,175
Deferred revenue	10,189			12,311
Lease rental	2,526			2,549
Non-performing loan interest	2,442			10,388
Other	9,415			6,343
Total gross deferred tax assets	186,402			189,445
Less valuation allowance	—			(3,431		)
Total deferred tax assets	186,402			186,014
Deferred tax liabilities
Excess tax over financial statement depreciation	(31,260		)	(8,080		)
Other properties held for sale	(5,469		)	(5,447		)
Other	(8,539		)	(6,699		)
Total gross deferred income tax liabilities	(45,268		)	(20,226		)
Net deferred tax assets	$	141,134		$	165,788

Schedule of Net Operating Loss and Tax Credit Carryforward

State NOL and tax credit carryforwards as of December 31, 2018 are summarized in the following table.



Tax Carryforwards	As of December 31, 2018
(in thousands)	Expiration Dates	Deferred Tax Asset Balance		Valuation Allowance		Net Deferred Tax Asset Balance		Pre-Tax Earnings Necessary to Realize⁽¹⁾
Net operating losses - states	2023-2027	$	1,431	$	—	$	1,431	$	1,429,499
Net operating losses - states	2028-2032	39,483		—		39,483		914,384
Net operating losses - states	2033-2036	356		—		356		7,356
Other credits - states	2019-2023	20,164		—		20,164		N/A
Other credits - states	2024-2028	2,388		—		2,388		N/A


⁽¹⁾	N/A indicates credits are not measured on a pre-tax earnings basis.

Reconciliation of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized income tax benefits is as follows (unrecognized state income tax benefits are not adjusted for the federal income tax impact).



	Years Ended December 31,
(in thousands)	2018			2017			2016
Balance at January 1,	$	15,117		$	14,745		$	12,745
Additions based on income tax positions related to current year	1,165			152			—
Additions for income tax positions of prior years⁽¹⁾	2,321			934			1,811
Additions from acquisition	—			—			608
Reductions for income tax positions of prior years	—			(706		)	—
Statute of limitation expirations	(17		)	(8		)	(419		)
Balance at December 31,	$	18,586		$	15,117		$	14,745


⁽¹⁾	Includes deferred tax benefits that could reduce future tax liabilities.