Income Taxes

12 Months Ended

Dec. 31, 2022

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,
	2022		2021		2020
Current
Federal	$	39,507	$	34,629	$	30,193
State	3,453		895		3,309
	42,960		35,524		33,502
Deferred
Federal	1,630		9,168		(10,947)
State	650		2,243		(2,715)
	2,280		11,411		(13,662)
	$	45,240	$	46,935	$	19,840

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,
	2022		2021		2020
Tax at U.S. statutory rate	$	44,375	$	46,794	$	21,733
Increase (decrease) in taxes resulting from:
Tax-exempt interest income	(1,832)		(1,669)		(1,431)
BOLI income	(1,946)		(1,547)		(1,182)
Investment tax credits	(928)		(988)		(1,494)
Amortization of investment in low-income housing tax credits	683		817		1,280
State income tax expense, net of federal benefit	3,241		2,479		469
Other items, net	1,647		1,049		465
	$	45,240	$	46,935	$	19,840

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

	December 31,
	2022		2021
Deferred tax assets
Allowance for credit losses	$	52,551	$	50,712
Loans	2,518		2,855
Deferred compensation	14,447		14,522
Net unrealized losses on securities	70,999		3,545
Impairment of assets	316		392
Net operating loss carryforwards	497		1,211
Investments in partnerships	1,164		890
Lease liabilities under operating leases	14,641		17,106
Other	3,523		3,241
Total deferred tax assets	160,656		94,474
Deferred tax liabilities
Fixed assets	10,342		5,339
Mortgage servicing rights	19,624		20,779
Junior subordinated debt	1,948		2,130
Intangibles	2,702		3,177
Lease right-of-use asset	14,018		16,209
Other	1,614		1,607
Total deferred tax liabilities	50,248		49,241
Net deferred tax assets	$	110,408	$	45,233

The effective tax rate was 21.78% and 22.41% for the year ended December 31, 2022 and 2021, 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, 2020 through 2022. The Company and its subsidiaries’ state income tax returns are open to audit under the statute of limitations for the years ended December 31, 2020 through 2022.

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, 2022, there were state net operating losses without expiration periods of $5,388. The federal and state net operating losses acquired in the Heritage Financial Group, Inc. acquisition were $18,321 and $16,849, respectively, of which $1,101 and $278 remain to be utilized as of December 31, 2022. 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, 2022.

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

	December 31,
	2022		2021
Net Operating Losses
Federal	$	1,101	$	2,065
State	5,666		16,954

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:

	2022		2021		2020
Balance at January 1	$	408	$	402	$	667
Additions based on positions related to current period	65		62		101
Reductions based on positions related to prior period	—		—		(314)
Reductions due to lapse of statute of limitations	(66)		(56)		(52)
Balance at December 31	$	407	$	408	$	402

If ultimately recognized, the Company does not anticipate any material increase in the effective tax rate for 2022 relative to any tax positions taken prior to January 1, 2022. The Company had accrued $17, $15 and $18 for interest and penalties related to unrecognized tax benefits as of December 31, 2022, 2021 and 2020, respectively.