Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

(In Thousands)

Significant components of the provision for income taxes are as follows for the periods presented:

	Year Ended December 31,
	2021		2020		2019
Current
Federal	$	34,629	$	30,193	$	23,786
State	895		3,309		4,264
	35,524		33,502		28,050
Deferred
Federal	9,168		(10,947)		17,331
State	2,243		(2,715)		2,710
	11,411		(13,662)		20,041
	$	46,935	$	19,840	$	48,091

The reconciliation of income taxes computed at the United States federal statutory tax rates to the provision for income taxes is as follows, for the periods presented:

	Year Ended December 31,
	2021		2020		2019
Tax at U.S. statutory rate	$	46,794	$	21,733	$	45,294
Increase (decrease) in taxes resulting from:
Tax-exempt interest income	(1,669)		(1,431)		(1,205)
BOLI income	(1,547)		(1,182)		(1,283)
Investment tax credits	(988)		(1,494)		(1,863)
Amortization of investment in low-income housing tax credits	817		1,280		1,575
State income tax expense, net of federal benefit	2,479		469		5,509
Other items, net	1,049		465		64
	$	46,935	$	19,840	$	48,091

Significant components of the Company’s deferred tax assets and liabilities are as follows for the periods presented: 

	December 31,
	2021		2020
Deferred tax assets
Allowance for credit losses	$	50,712	$	53,597
Loans	2,855		5,526
Deferred compensation	14,522		13,114
Net unrealized losses on securities	3,545		—
Impairment of assets	392		1,067
Net operating loss carryforwards	1,211		1,857
Investments in partnerships	890		—
Lease liabilities under operating leases	17,106		17,732
Other	3,241		3,539
Total deferred tax assets	94,474		96,432
Deferred tax liabilities
Net unrealized gains on securities	—		8,434
Investment in partnerships	—		793
Fixed assets	5,339		3,285
Mortgage servicing rights	20,779		14,623
Junior subordinated debt	2,130		2,245
Intangibles	3,177		3,882
Lease right-of-use asset	16,209		16,833
Other	1,607		1,672
Total deferred tax liabilities	49,241		51,767
Net deferred tax assets	$	45,233	$	44,665

The effective tax rate was 22.41% and 19.40% for the year ended December 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 for the years ending December 31, 2018 through 2020. The Company and its subsidiaries’ state income tax returns are open to audit under the statute of limitations for the years ended December 31, 2018 through 2020.

The Company acquired 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 $81,288 and $55,067, respectively, all created in 2018. As part of the 2017 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 during 2018 have an indefinite carryforward period.  The federal net operating loss related to the Brand acquisition was fully utilized during 2021, while at December 31, 2021, there were state net operating losses without expiration periods of $15,712. The federal and state net operating losses acquired in the Heritage Financial Group, Inc. acquisition were $18,321 and $16,849, respectively, of which $2,065 and $1,242 remain to be utilized as of December 31, 2021. These losses begin to expire in 2029 and are expected to be fully utilized. Because the benefits are expected to be fully realized, the Company recorded no valuation allowance against the net operating losses for the year ended December 31, 2021.

The table below presents the breakout of net operating losses as of the dates presented.

	December 31,
	2021		2020
Net Operating Losses
Federal	$	2,065	$	3,029
State	16,954		26,971

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest, related to federal and state income tax matters as of December 31 follows below:

	2021		2020		2019
Balance at January 1	$	402	$	667	$	1,919
Additions based on positions related to current period	62		101		158
Reductions based on positions related to prior period	—		(314)		(1,410)
Reductions due to lapse of statute of limitations	(56)		(52)		—
Balance at December 31	$	408	$	402	$	667

If ultimately recognized, the Company does not anticipate any material increase in the effective tax rate for 2021 relative to any tax positions taken prior to January 1, 2021. The Company had accrued $15, $18 and $105 for interest and penalties related to unrecognized tax benefits as of December 31, 2021, 2020 and 2019, respectively.