INCOME TAXES

9 Months Ended

Sep. 30, 2020

Income Tax Expense

Federal and state income tax expense and the statutory tax rate and the actual effective tax rate consist of the following:

TABLE 14.1


	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions)	2020			2019			2020			2019
Current income taxes:
Federal taxes	$	16		$	(3)		$	62		$	24
State taxes	1			—			6			3
Total current income taxes	17			(3)			68			27
Deferred income taxes:
Federal taxes	—			19			(24)			34
State taxes	—			1			—			2
Total deferred income taxes	—			20			(24)			36
Total income taxes	$	17		$	17		$	44		$	63
Statutory tax rate	21.0		%	21.0		%	21.0		%	21.0		%
Effective tax rate	17.0		%	14.5		%	17.0		%	17.8		%

The effective tax rate for the nine months ended September 30, 2020 and September 30, 2019 was lower than the statutory tax rate of 21% due to tax benefits resulting from tax-exempt income on investments and loans, tax credits and income from BOLI. The lower effective tax rate for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 is primarily due to lower pre-tax income levels in the 2020 COVID-19 environment. However, the higher effective tax rate of 17.0% in the third quarter of 2020 compared to 14.5% in the third quarter of 2019 is due to the recognition of renewable energy investment tax credits in the third quarter of 2019.

Deferred Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and tax purposes. Deferred tax assets and liabilities are measured based on the enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. Net deferred tax assets were $52.6 million and $25.1 million at September 30, 2020 and December 31, 2019, respectively.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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