Income Taxes

9 Months Ended

Sep. 30, 2020

(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,
	2020		2019
Deferred tax assets
Allowance for credit losses	$	45,891	$	14,304
Loans	11,579		10,284
Deferred compensation	11,605		12,050

Impairment of assets	1,631		1,108
Net operating loss carryforwards	2,607		9,387

Lease liabilities under operating leases	22,271		22,686
Other	208		934
Total deferred tax assets	95,792		70,753


Deferred tax liabilities

Net unrealized gains on securities	6,057		190
Investment in partnerships	982		967

Fixed assets	7,688		2,952
Mortgage servicing rights	14,121		13,472
Junior subordinated debt	2,237		2,304

Lease right-of-use asset	21,203		21,727
Other	1,457		1,859
Total deferred tax liabilities	53,745		43,471
Net deferred tax assets	$	42,047	$	27,282

For the nine months ended September 30, 2020 and 2019, the Company recorded a provision for income taxes totaling $13,022 and $38,667, 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 20.28% and 23.04% for the nine months ended September 30, 2020 and 2019, respectively.

The Company and its subsidiaries 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, 2019.

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 its acquisition of Brand Group Holdings, Inc. (“Brand”) were $81,288 and $55,067, 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 September 30, 2020, there are federal and state net operating losses acquired in the Brand acquisition without expiration periods of $2,248 and $28,495, 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 $16,849, respectively, of which $3,269 and $2,446 remain to be utilized as of September 30, 2020. 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, 2020.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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