Income Taxes

3 Months Ended

Mar. 31, 2021

(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.


	March 31,		December 31,
	2021		2020
Deferred tax assets
Allowance for credit losses	$	53,318	$	53,597
Loans	4,883		5,526
Deferred compensation	12,311		13,114

Impairment of assets	874		1,067
Net operating loss carryforwards	1,667		1,857

Lease liabilities under operating leases	18,168		17,732
Other	3,504		3,539
Total deferred tax assets	94,725		96,432


Deferred tax liabilities

Net unrealized gains on securities	6,804		8,434
Investment in partnerships	719		793

Fixed assets	2,534		3,285
Mortgage servicing rights	19,025		14,623
Junior subordinated debt	2,223		2,245
Intangibles	3,968		3,882
Lease right-of-use asset	17,239		16,833
Other	1,459		1,672
Total deferred tax liabilities	53,971		51,767
Net deferred tax assets	$	40,754	$	44,665

For the three months ended March 31, 2021 and 2020, the Company recorded a provision for income taxes totaling $16,842 and $773, 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 22.59% and 27.80% for the three months ended March 31, 2021 and 2020, 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 state departments of revenue for the years ending December 31, 2017 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 March 31, 2021, there are state net operating losses acquired in the Brand acquisition without expiration periods of $21,781. 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 $2,788 and $1,965 remain to be utilized as of March 31, 2021. 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 March 31, 2021.

- 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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