Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Summary of Differences in Taxes from Continuing Operations Computed at Statutory Rate

Following is a summary of the major items comprising the differences in taxes from continuing operations computed at the federal statutory rate and as recorded in the consolidated statement of income:

	Years Ended December 31,
(dollars in thousands)	2018				2017				2016
Provision at statutory rate (1)	$	43,823			$	59,032			$	70,149
Tax-exempt income:
Tax-exempt interest		(9,021	)			(15,026	)			(14,356	)
Section 291/265 interest disallowance		321				289				191
Company-owned life insurance income		(2,223	)			(3,029	)			(2,968	)
Tax-exempt income		(10,923	)			(17,766	)			(17,133	)
State income taxes		5,621				998				3,461
Tax credit investments - federal		(21,576	)			(8,500	)			(321	)
Revaluation of deferred tax assets		—				39,300				—
ONB Insurance Group, Inc. nondeductible goodwill		—				—				8,328
Other, net		905				(125	)			1,678
Income tax expense	$	17,850			$	72,939			$	66,162
Effective tax rate		8.6		%		43.3		%		33.0		%

(1)

The statutory rate in effect was 21% for 2018, compared to 35% for 2017 and 2016.

Provision for Income Taxes

The provision for income taxes consisted of the following components for the years ended December 31:

	Years Ended December 31,
(dollars in thousands)	2018			2017		2016
Income taxes currently payable:
Federal	$	12,256		$	—	$	23,735
State		4,601			—		2,242
Deferred income taxes related to:
Federal		(1,513	)		31,915		35,955
Revaluation of deferred tax assets		—			39,300		—
State		2,506			1,724		4,230
Deferred income tax expense		993			72,939		40,185
Income tax expense	$	17,850		$	72,939	$	66,162

Schedule of Significant Components of Net Deferred Tax Assets (Liabilities)

Significant components of net deferred tax assets (liabilities) were as follows at December 31:

(dollars in thousands)	2018			2017
Deferred Tax Assets
Allowance for loan losses, net of recapture	$	14,514		$	12,958
Benefit plan accruals		21,694			11,080
Alternative minimum tax credit		2,545			25,084
Unrealized losses on benefit plans		61			108
Net operating loss carryforwards		31,765			39,631
Federal tax credits		1,779			5,516
Deferred gain on securities		1,976			—
Other-than-temporary impairment		37			1,424
Acquired loans		26,956			29,669
Lease exit obligation		1,025			1,337
Unrealized losses on available-for-sale investment securities		11,853			14,011
Unrealized losses on held-to-maturity investment securities		2,497			3,630
Unrealized losses on hedges		—			923
Tax credit investments		662			—
Other real estate owned		144			369
Other, net		5,471			829
Total deferred tax assets		122,979			146,569
Deferred Tax Liabilities
Accretion on investment securities		(595	)		(493	)
Purchase accounting		(18,100	)		(16,718	)
Loan servicing rights		(6,141	)		(6,058	)
Premises and equipment		(8,507	)		(10,052	)
Prepaid expenses		(681	)		(1,277	)
Tax credit investments		—			(168	)
Unrealized gains on hedges		(358	)		—
Other, net		(1,549	)		(946	)
Total deferred tax liabilities		(35,931	)		(35,712	)
Net deferred tax assets	$	87,048		$	110,857

Summary of Reconciliation of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:

	Years Ended December 31,
(dollars in thousands)	2018			2017			2016
Balance at beginning of period	$	874		$	777		$	124
Additions based on tax positions related to the current year		—			162			118
Additions (reductions) based on tax positions related to prior years		(78	)		—			537
Reductions due to statute of limitations expiring		(301	)		(173	)		(2	)
Revaluation due to Tax Reform		—			108			—
Balance at end of period	$	495		$	874		$	777