Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Components of Provision for Income Taxes

The components of our provision for income taxes for 2018, 2017 and 2016 were as follows:



	Year ended December 31,
(Dollars in thousands)	2018			2017		2016
Current provision:
Federal	$	249,358		$	263,231	$	195,249
State	123,264			67,046		59,319
Deferred (benefit) expense:
Federal	(11,777		)	24,654		(3,560		)
State	(9,284		)	532		(675		)
Income tax expense	$	351,561		$	355,463	$	250,333

Reconciliation between Federal Statutory Income Tax Rate and Effective Income Tax Rate

Our effective tax rate is calculated by dividing income tax expense by the sum of income before income tax expense and the net income attributable to noncontrolling interests. The reconciliation between the federal statutory income tax rate and our effective income tax rate for 2018, 2017 and 2016, is as follows:



	December 31,
(Dollars in thousands)	2018		2017		2016
Federal statutory income tax rate	21.0	%	35.0	%	35.0	%
State income taxes, net of the federal tax effect	7.2		5.8		5.9
Net deferred tax assets revaluation (TCJ Act)	—		4.3		—
Meals and entertainment	0.3		0.3		0.4
Disallowed officers' compensation	0.2		0.1		0.1
FDIC premiums	0.5		—		—
Share-based compensation expense on incentive stock options and ESPP	(1.4	)	(2.1	)	—
Qualified affordable housing project tax credits	(0.3	)	(0.4	)	(0.5	)
Tax-exempt interest income	(0.6	)	(0.3	)	(0.2	)
Valuation allowance benefit	—		—		(0.3	)
Other, net	(0.4	)	(0.7	)	(0.9	)
Effective income tax rate	26.5	%	42.0	%	39.5	%

Deferred Tax Assets (Liabilities)

Deferred tax assets and liabilities at December 31, 2018 and 2017, consisted of the following:



	December 31,
(Dollars in thousands)	2018			2017
Deferred tax assets:
Allowance for loan losses	$	93,580		$	84,812
Net unrealized losses on AFS debt securities	19,704			12,404
Share-based compensation expense	10,642			9,418
State income taxes	13,854			9,186
Accrued compensation	8,291			8,336
Deferred rent	7,940			8,169
Other accruals	7,061			7,165
Net operating loss	2,447			2,300
Loan fee income and costs	—			1,189
Other	11,339			3,639
Deferred tax assets	174,858			146,618
Valuation allowance	(2,107		)	(2,624		)
Net deferred tax assets after valuation allowance	172,751			143,994

Deferred tax liabilities:
Derivative equity warrant assets	(32,861		)	(29,127		)
Change in accounting method (section 481(a))	(8,034		)	(15,953		)
Net unrealized gains on AFS equity securities	—			(11,145		)
Non-marketable and other equity securities	(45,759		)	(10,724		)
Premises and equipment and other intangibles	(10,284		)	(9,223		)
Other	(10,380		)	(3,977		)
Deferred tax liabilities	(107,318		)	(80,149		)
Net deferred tax assets	$	65,433		$	63,845

Changes in Unrecognized Tax Benefit (Including Interest and Penalties)

A summary of changes in our unrecognized tax benefit (including interest and penalties) for December 31, 2018, 2017 and 2016 is as follows:



(Dollars in thousands)	Reconciliation of Unrecognized Tax Benefit			Interest and Penalties			Total
Balance at December 31, 2015	$	3,357		$	301		$	3,658
Additions for tax positions for current year	793			—			793
Additions for tax positions for prior years	1,427			166			1,593
Reduction for tax positions for prior years	(271		)	(16		)	(287		)
Lapse of the applicable statute of limitations	(37		)	(9		)	(46		)
Balance at December 31, 2016	$	5,269		$	442		$	5,711
Additions for tax positions for current year	3,141			—			3,141
Additions for tax positions for prior years	3,378			754			4,132
Reduction for tax positions for prior years	(223		)	(1		)	(224		)
Lapse of the applicable statute of limitations	(60		)	(17		)	(77		)
Balance at December 31, 2017	$	11,505		$	1,178		$	12,683
Additions for tax positions for current year	4,171			—			4,171
Additions for tax positions for prior years	631			823			1,454
Reduction for tax positions for prior years	(1,865		)	(243		)	(2,108		)
Lapse of the applicable statute of limitations	(435		)	(86		)	(521		)
Reduction as a result of settlement	(1,318		)	$	(222	)	$	(1,540	)
Balance at December 31, 2018	$	12,689		$	1,450		$	14,139