Income Taxes

9 Months Ended

Sep. 30, 2019

(In Thousands)

The following table is a summary of the Company’s temporary differences between the tax basis of assets and liabilities and their financial reporting amounts that give rise to deferred income tax assets and liabilities and their approximate tax effects as of the dates presented.



	September 30,		December 31,
	2019		2018
Deferred tax assets
Allowance for loan losses	$	15,276	$	14,097
Loans	14,260		18,655
Deferred compensation	10,941		10,001
Securities	—		6,180
Impairment of assets	1,150		1,280
Federal and State net operating loss carryforwards	12,357		19,065
Leases	23,485		—
Other	6,074		9,800
Total deferred tax assets	83,543		79,078
Deferred tax liabilities
Securities	507		—
Investment in partnerships	1,265		1,572
Fixed assets	3,864		3,865
Mortgage servicing rights	13,179		12,350
Junior subordinated debt	2,372		1,607
Intangibles	5,255		6,190
Right of use assets	22,498		—
Other	1,369		1,792
Total deferred tax liabilities	50,309		27,376
Net deferred tax assets	$	33,234	$	51,702

For the nine months ended September 30, 2019 and 2018, the Company recorded a provision for income taxes totaling $38,667 and $28,629, respectively. The provision for income taxes includes both federal and state income taxes and differs from the statutory

rate due to favorable permanent differences. The effective tax rate was 23.04% and 21.83% for the nine months ended September 30, 2019 and 2018, respectively.

The Company and its subsidiary file a consolidated U.S. federal income tax return. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and the state departments of revenue for the years ending December 31, 2015 through December 31, 2018.

The Company acquired both federal and state net operating losses as part of its previous acquisitions with varying expiration periods. The federal and state net operating losses acquired in the Brand acquisition were $83,960 and $67,168, respectively, as of the September 1, 2018 acquisition date, all created in 2018. As part of The Tax Cuts and Jobs Act and corresponding state tax laws, the federal net operating losses and the majority of the state net operating losses created by Brand have an indefinite carryforward period. As of December 31, 2018, there are federal and state net operating losses acquired in the Brand acquisition, without expiration periods of $71,963 and $63,218, respectively. The federal and state net operating losses acquired in the Company’s acquisition of Heritage Financial Group, Inc. (“Heritage”) in 2015 were $18,321 and $16,877, respectively, of which $4,956 and $2,365 remain to be utilized as of December 31, 2018. The net operating losses related to the Heritage acquisition begin to expire in 2029 and are expected to be utilized. Because the benefits are expected to be fully realized, the Company recorded no valuation allowance against the net operating losses for the period ending September 30, 2019.