Income Taxes

Income tax expense was as follows:



	2017			2016			2015
Current income tax expense	$	58,707		$	48,748		$	59,530
Deferred income tax expense (benefit)	(14,493		)	(11,598		)	(19,059		)
Income tax expense, as reported	$	44,214		$	37,150		$	40,471

Effective tax rate	10.8		%	10.9		%	12.7		%

A reconciliation between reported income tax expense and the amounts computed by applying the U.S. federal statutory income tax rate of 35% to income before income taxes is presented in the following table.



	2017			2016			2015
Income tax expense computed at the statutory rate	$	142,927		$	119,494		$	111,930
Effect of tax-exempt interest	(81,995		)	(75,696		)	(70,889		)
Bank owned life insurance income	(1,116		)	(1,260		)	(1,255		)
Net tax benefit from stock-based compensation	(9,062		)	(5,063		)	—
Provisional deferred tax adjustment related to reduction in U.S. federal statutory income tax rate	(4,047		)	—			—
Correction for prior year tax-exempt interest	(2,906		)	—			—
Other	413			(325		)	685
Income tax expense, as reported	$	44,214		$	37,150		$	40,471

Income tax expense for 2017 was impacted by the adjustment of our deferred tax assets and liabilities related to the reduction in the U.S. federal statutory income tax rate to 21% under the Tax Cuts and Jobs Act, which was enacted on December 22, 2017. As a result of the new law, which is more fully discussed below, we recognized a provisional net tax benefit totaling $4.0 million, as detailed in the table above. Income tax expense for 2017 was also impacted by the correction of an over-accrual of taxes that resulted from incorrectly classifying certain tax-exempt loans as taxable for federal income tax purposes since 2013. As a result, we recognized tax benefits totaling $2.9 million related to the 2013 through 2016 tax years, as detailed in the table above. During 2016, we adopted a new accounting standard that requires the income tax effects associated with stock-based compensation to be recognized as a component of income tax expense. We recognized net tax benefits related to stock-based compensation totaling $9.1 million in 2017 and $5.1 million in 2016, as detailed in the table above. See Note 1 - Significant Accounting Policies for additional information related to the accounting for the income tax effects of stock-based compensation. There were no unrecognized tax benefits during any of the reported periods. Interest and/or penalties related to income taxes are reported as a component of income tax expense. Such amounts were not significant during the reported periods.

Year-end deferred taxes are presented in the table below. As a result of the Tax Cuts and Jobs Act enacted on December 22, 2017 (discussed below), deferred taxes as of December 31, 2017 are based on the newly enacted U.S. statutory federal income tax rate of 21%. Deferred taxes as of December 31, 2016 are based on the previously enacted U.S. statutory federal income tax rate of 35%.



	2017			2016
Deferred tax assets:
Allowance for loan losses	$	32,626		$	53,566
Alternative minimum tax carryforward, no expiration date	47,104			30,384
Net actuarial loss on defined benefit post-retirement benefit plans	12,160			21,956
Stock-based compensation	9,904			18,140
Bonus accrual	1,136			7,035
Gain on sale of assets	883			2,485
Transaction costs	875			1,587
Other	3,996			4,449
Total gross deferred tax assets	108,684			139,602
Deferred tax liabilities:
Premises and equipment	(20,236		)	(33,777		)
Defined benefit post-retirement benefit plans	(9,012		)	(14,828		)
Intangible assets	(9,014		)	(11,697		)
Net unrealized gain on securities available for sale and transferred securities	(35,829		)	(8,699		)
Leases	(1,646		)	(3,042		)
Section 481(a) change in accounting method (tangible property)	—			(1,694		)
Prepaid expenses	(996		)	(1,743		)
Other	(233		)	(436		)
Total gross deferred tax liabilities	(76,966		)	(75,916		)
Net deferred tax asset (liability)	$	31,718		$	63,686

No valuation allowance for deferred tax assets was recorded at December 31, 2017 and 2016 as management believes it is more likely than not that all of the deferred tax assets will be realized against deferred tax liabilities and projected future taxable income. There were no unrecognized tax benefits during any of the reported periods.

We file income tax returns in the U.S. federal jurisdiction. We are no longer subject to U.S. federal income tax examinations by tax authorities for years before 2014.

Tax Cuts and Jobs Act. The Tax Cuts and Jobs Act was enacted on December 22, 2017. Among other things, the new law (i) establishes a new, flat corporate federal statutory income tax rate of 21%, (ii) eliminates the corporate alternative minimum tax and allows the use of any such carryforwards to offset regular tax liability for any taxable year, (iii) limits the deduction for net interest expense incurred by U.S. corporations, (iv) allows businesses to immediately expense, for tax purposes, the cost of new investments in certain qualified depreciable assets, (v) eliminates or reduces certain deductions related to meals and entertainment expenses, (vi) modifies the limitation on excessive employee remuneration to eliminate the exception for performance-based compensation and clarifies the definition of a covered employee and (vii) limits the deductibility of deposit insurance premiums. The Tax Cuts and Jobs Act also significantly changes U.S. tax law related to foreign operations, however, such changes do not currently impact us.

As stated above, as a result of the enactment of the Tax Cuts and Jobs Act on December 22, 2017, we remeasured our deferred tax assets and liabilities based upon the newly enacted U.S. statutory federal income tax rate of 21%, which is the tax rate at which these assets and liabilities are expected to reverse in the future. Notwithstanding the foregoing, we are still analyzing certain aspects of the new law and refining our calculations, which could affect the measurement of these assets and liabilities or give rise to new deferred tax amounts. Nonetheless, we recognized a provisional net tax benefit related to the remeasurement of our deferred tax assets and liabilities totaling $4.0 million.