Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Income tax expense for the years ended December 31, 2018, 2017 and 2016 consisted of the following:



	2018			2017		2016
	(in thousands)
Current expense:
Federal	$	51,147		$	8,483	$	25,176
State	28,898			5,500		12,904
	80,045			13,983		38,080
Deferred (benefit) expense:
Federal	(17,463		)	49,169		10,658
State	5,683			27,679		16,496
	(11,780		)	76,848		27,154
Total income tax expense	$	68,265		$	90,831	$	65,234

Summary of Deferred Tax Assets and Liabilities

The tax effects of temporary differences that gave rise to the significant portions of the deferred tax assets and liabilities as of December 31, 2018 and 2017 are as follows:



	2018		2017
	(in thousands)
Deferred tax assets:
Allowance for loan losses	$	42,882	$	34,885
Depreciation	19,111		8,336
Employee benefits	13,301		10,596
Investment securities, including other-than-temporary impairment losses	13,222		5,021
Net operating loss carryforwards	21,570		30,658
Purchase accounting	33,629		18,819
Capital loss carryforward	830		—
Other	21,274		21,930
Total deferred tax assets	165,819		130,245
Deferred tax liabilities:
Pension plans	18,786		18,912
Other investments	17,758		13,234
Deferred income	—		37,952
Core deposit intangibles	14,223		5,182
Other	8,858		7,469
Total deferred tax liabilities	59,625		82,749
Valuation Allowance	733		—
Net deferred tax asset (included in other assets)	$	105,461	$	47,496

Summary of Income Tax Reconciliation

Reconciliation between the reported income tax expense and the amount computed by multiplying consolidated income before taxes by the statutory federal income tax rate of 21 percent for the year ended December 31, 2018, and 35 percent for the years ended December 31, 2017 and 2016 were as follows:



	2018			2017			2016
	(in thousands)
Federal income tax at expected statutory rate	$	69,235		$	88,458		$	81,683
Increase (decrease) due to:
State income tax expense, net of federal tax effect	23,851			21,046			19,197
Tax-exempt interest, net of interest incurred to carry tax-exempt securities	(3,974		)	(5,245		)	(5,308		)
Bank owned life insurance	(1,734		)	(2,568		)	(2,343		)
Tax credits from securities and other investments	(20,798		)	(27,037		)	(25,954		)
FDIC insurance premium	3,318			—			—
Impact of the Tax Act	(2,274		)	15,441			—
Other, net	641			736			(2,041		)
Income tax expense	$	68,265		$	90,831		$	65,234

Summary of Reconciliation of Gross Unrecognized Tax Benefits

A reconciliation of Valley’s gross unrecognized tax benefits for 2018, 2017 and 2016 are presented in the table below:



	2018			2017			2016
	(in thousands)
Beginning balance	$	4,238		$	16,144		$	19,892
Additions based on tax positions related to prior years	—			1,121			3,958
Settlements with taxing authorities	—			(13,027		)	(4,820		)
Reductions due to expiration of statute of limitations	(4,238		)	—			(2,886		)
Ending balance	$	—		$	4,238		$	16,144