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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
NOTE 13 - INCOME TAXES
The components of income taxes are as follows:
202320222021
 (dollars in thousands)
Current tax expense:
Federal$49,707 $44,478 $35,692 
State11,137 6,906 10,646 
Total current tax expense60,844 51,384 46,338 
Deferred tax (benefit) expense:
Federal3,021 8,974 11,081 
State576 (324)1,329 
Total deferred tax (benefit) expense3,597 8,650 12,410 
Total income tax expense$64,441 $60,034 $58,748 
The differences between the effective income tax rate and the federal statutory income tax rate are as follows:
202320222021
Statutory tax rate21.0 %21.0 %21.0 %
Tax credit investments(1.3)(2.0)(3.0)
Tax-exempt income(4.2)(3.5)(3.0)
Bank owned life insurance(0.8)(0.7)(0.5)
State income taxes, net of federal benefit2.6 1.2 2.6 
Executive compensation0.3 0.3 0.1 
FDIC Premium0.5 0.3 0.3 
Other, net0.4 0.7 0.1 
Effective income tax rate18.5 %17.3 %17.6 %

The net DTA recorded by the Corporation is included in other assets and consists of the following tax effects of temporary differences as of December 31:
20232022
(dollars in thousands)
Deferred tax assets:
Unrealized holding losses on securities$90,671 $110,689 
Allowance for credit losses71,013 65,481 
State loss carryforwards27,948 26,421 
Lease liability21,570 21,264 
Other accrued expenses11,082 10,059 
Deferred compensation10,215 9,014 
Intangible assets7,460 3,023 
Stock-based compensation5,129 4,681 
Tax credit carryforwards4,995 5,146 
Other5,469 5,223 
Total gross deferred tax assets$255,552 $261,001 
Deferred tax liabilities:
Equipment lease financing47,345 26,560 
Right-of-use-asset20,022 19,276 
MSRs7,158 7,750 
Acquisition premiums/discounts5,508 5,492 
Postretirement and defined benefit plans3,438 1,755 
Tax credit investments1,747 3,393 
Premises and equipment1,678 5,775 
Other— 16 
Total gross deferred tax liabilities$86,896 $70,017 
Net deferred tax asset, before valuation allowance168,656 190,984 
Valuation allowance(27,948)(26,421)
Net deferred tax asset$140,708 $164,563 

In assessing the realizability of DTAs, management considers whether it is more likely than not that some or all of the DTAs will not be realized. The ultimate realization of DTAs is dependent upon the generation of future taxable income and/or capital gain income during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies, such as those that may be implemented to generate capital gains, in making this assessment.
The valuation allowance relates to state net operating loss carryforwards for which realizability is uncertain. As of December 31, 2023 and 2022, the Corporation had state net operating loss carryforwards of approximately $354 million and $335 million, respectively, which are available to offset future state taxable income, and expire at various dates through 2043.

As of December 31, 2023, based on the level of historical taxable income and projections for future taxable income over the periods in which the DTAs are deductible, management believes it is more likely than not that the Corporation will realize the benefits of its DTAs, net of the valuation allowance.

As of December 31, 2023, the Corporation had tax credit carryforwards related to TCIs of approximately $5 million. The Corporation recorded a DTA of $5 million, reflecting the benefit of these tax credit carryforwards, which will begin to expire in 2042 if not yet utilized.

Uncertain Tax Positions
The following table summarizes the changes in unrecognized tax benefits for the years ended December 31:
202320222021
(dollars in thousands)
Balance at beginning of year$1,228 $1,673 $2,151 
Current period tax positions147 112 120 
Lapse of statute of limitations(331)(557)(598)
Balance at end of year$1,044 $1,228 $1,673 

Virtually all of the Corporation's unrecognized tax benefits are for positions that are taken on an annual basis on state tax returns. Increases to unrecognized tax benefits will occur as a result of accruing for the nonrecognition of the position for the current year.

Decreases will occur as a result of the lapsing of the statute of limitations for the oldest outstanding year which includes the position. These offsetting increases and decreases are likely to continue in the future, including over the next twelve months. While the net effect on total unrecognized tax benefits during this period cannot be reasonably estimated, approximately $0.1 million is expected to reverse in 2024 due to lapsing of the statute of limitations. Decreases can also occur throughout the settlement of positions with taxing authorities.

As of December 31, 2023, if recognized, all of the Corporation's unrecognized tax benefits would impact the effective tax rate. Not included in the table above is $0.2 million of federal income tax benefit on unrecognized state tax benefits which, if recognized, would also impact the effective tax rate. Interest accrued related to unrecognized tax benefits is recorded as a component of income tax expense. Penalties, if incurred, would also be recognized in income tax expense. The Corporation recognized approximately $138 thousand and $121 thousand of recoveries in 2023 and 2022, respectively, for interest and penalties in income tax expense related to unrecognized tax positions. As of December 31, 2023 and 2022, total accrued interest and penalties related to unrecognized tax positions were approximately $0.3 million and $0.5 million, respectively.

The Corporation files income tax returns in the federal and various state jurisdictions. In most cases, unrecognized tax benefits are related to tax years that remain subject to examination by the relevant taxing authorities. With few exceptions, the Corporation is no longer subject to federal, state and local examinations by tax authorities for years before 2020.

Tax Credit Investments

The TCIs are included in other assets, with any unfunded equity commitments recorded in other liabilities on the consolidated balance sheets and changes are reflected in change in tax credit investments in the consolidated statements of cash flows.

In 2023, the Corporation adopted ASU 2023-02, which allows all TCIs to qualify for the proportional amortization method if: (1) it is probable that the income tax credits allocatable to the Corporation will be available; (2) the Corporation does not have the ability to exercise significant influence over the operating and financial policies of the underlying project; (3) substantially all of the projected benefits are from income tax credits and other income tax benefits; (4) the Corporation's projected yield based solely on the cash flows from the income tax credits and other income tax benefits is positive; and (5) the Corporation is a limited liability investor in the limited liability entity for both legal and tax purposes, and the Corporation’s liability is limited to its capital investment. See "Note 1 - Summary of Significant Accounting Policies" in the Notes to the Consolidated Financial Statements.
All TCIs held as of December 31, 2023 that qualify for the proportional amortization method, are amortized over the period the Corporation expects to receive the tax credits, with the expense included within income taxes on the consolidated statements of income and net income in the consolidated statements of cash flows.

All TCIs are evaluated for impairment at the end of each reporting period. There were no impairments recorded against TCIs during 2023.

The following table presents the balances of the Corporation's TCIs and related unfunded commitments as of December 31:
20232022
Included in other assets:(dollars in thousands)
Affordable housing tax credit investments, net$170,115 $161,103 
Other tax credit investments, net35,907 61,077 
Total TCIs, net$206,022 $222,180 
Included in other liabilities:
Unfunded affordable housing tax credit commitments$58,312 $53,108 
Other tax credit liabilities28,361 46,814 
Total unfunded tax credit commitments and liabilities$86,673 $99,922 

The following table presents other information relating to the Corporation's TCIs for the years ended December 31:
202320222021
(dollars in thousands)
Components of income taxes:
Tax credits and benefits$(28,748)$(27,154)$(28,141)
Amortization of tax credits and benefits, net of tax benefits23,446 19,298 17,378 
Deferred tax expense610 766 639 
Total reduction in income tax expense$(4,692)$(7,090)$(10,124)
Amortization of TCIs:
Total amortization of TCIs$— $2,783 $6,187