Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 14. Income Taxes

Income tax expense (benefit) included in net income consisted of the following components:

	Years Ended December 31,
($ in thousands)	2022			2021		2020
Included in net income
Current federal	$	142,433		$	86,858	$	(58,723	)
Current state		14,840			7,607		(132	)
Total current provision		157,273			94,465		(58,855	)
Deferred federal		(23,556	)		7,035		(17,000	)
Deferred state		1,390			3,341		(3,716	)
Total deferred provision		(22,166	)		10,376		(20,716	)
Total expense (benefit) included in net income	$	135,107		$	104,841	$	(79,571	)

Income tax expense (benefit) does not reflect the tax effects of amounts recognized in other comprehensive income and in AOCI, a separate component of stockholders’ equity. These amounts include unrealized gains and losses on securities available for sale or transferred to held to maturity, unrealized gains and losses on derivatives and hedging transactions, and valuation adjustments of defined benefit and other post-retirement benefit plans. Refer to Note 12 – Stockholders’ Equity for additional information.

Temporary differences arise between the tax bases of assets or liabilities and their carrying amounts for financial reporting purposes. The expected tax effects from when these differences are resolved are recorded currently as deferred tax assets or liabilities.

Significant components of the Company’s deferred tax assets and liabilities were as follows:

	December 31,
($ in thousands)	2022			2021
Deferred tax assets:
Allowance for loan losses	$	77,045		$	85,118
Loan purchase accounting adjustments		485			1,838
Tax credit carryforward		—			2,326
Federal/state net operating loss		3,591			3,646
Lease liability		26,207			27,553
Net unrealized losses on securities available-for-sale and cash flow hedges		195,090			—
Derivatives		38,082			1,735
Other		10,085			8,883
Gross deferred tax assets		350,585			131,099
State valuation allowance		(3,591	)		(3,646	)
Net deferred tax assets	$	346,994		$	127,453
Deferred tax liabilities:
Employee compensation and benefits	$	(8,399	)	$	(11,137	)
Net unrealized gains on securities available-for-sale an cash flow hedges		—			(10,136	)
Fixed assets & intangibles		(26,589	)		(35,705	)
Lease Financing		(52,385	)		(52,896	)
Right-of-use Asset		(21,809	)		(23,075	)
Other		(26,394	)		(13,938	)
Gross deferred tax liabilities	$	(135,576	)	$	(146,887	)
Net deferred tax asset (liability)	$	211,418		$	(19,434	)

Reported income tax expense (benefit) differed from amounts computed by applying the statutory income tax rate of 21% for the years ended December 31, 2022, 2021 and 2020 to earnings or loss before income taxes. Historically, the primary differences have been due to tax-exempt income, federal and state tax credits and excess tax benefits from stock-based compensation. The year ended December 31, 2020 includes an incremental 14% tax benefit totaling $30.2 million associated with the five-year carryback of both the 2020 net operating loss (“NOL”) and the NOL attribute inherited from an acquired entity to a 35% statutory rate tax year, as allowed by provisions of the CARES Act. In addition, the 2021 effective tax rate was favorably impacted by a $4.9 million benefit associated with changing certain fixed asset tax elections that resulted in an increase in the 2020 NOL. The main source of tax credits has been investments in tax-advantaged securities and tax credit projects. These investments are made primarily in the markets we serve and directed at tax credits issued under the Federal and State New Market Tax Credit (“NMTC”) programs, Low-Income Housing Tax Credit (“LIHTC”) programs, as well as pre-2018 Qualified Zone Academy Bonds (“QZAB”), Qualified School Construction Bonds (“QSCB”). A summary of the factors that impacted income tax expense follows.

	Years Ended December 31,
	2022							2021							2020
($ in thousands)	Amount			%				Amount			%				Amount			%
Taxes computed at statutory rate	$	138,431			21.0		%	$	119,292			21.0		%	$	(26,196	)		21.0		%
Increases (decreases) in taxes resulting from:
State income taxes, net of federal income tax benefit		13,272			2.0				9,048			1.6				(1,269	)		1.0
Tax-exempt interest		(8,612	)		(1.3	)			(9,100	)		(1.6	)			(10,444	)		8.4
Life insurance contracts		(1,812	)		(0.3	)			(2,653	)		(0.5	)			(4,857	)		3.9
Tax credits		(8,039	)		(1.2	)			(7,889	)		(1.4	)			(8,072	)		6.5
Employee share-based compensation		(2,084	)		(0.3	)			(1,671	)		(0.3	)			1,351			(1.1	)
FDIC assessment disallowance		1,836			0.3				1,609			0.3				2,094			(1.7	)
Net operating loss carryback under CARES act		238			—				(4,948	)		(0.9	)			(30,167	)		24.2
Other, net		1,877			0.3				1,153			0.3				(2,011	)		1.6
Income tax expense	$	135,107			20.5		%	$	104,841			18.5		%	$	(79,571	)		63.8		%

The Company had approximately $61.0 million in state net operating loss carryforwards that originated in the tax years 2003 through 2020 and begin expiring in 2032. A $61.0 million gross state valuation allowance has been established for all non-bank

entity level state NOL carryforwards, which translates to a net $3.6 million valuation allowance in the Company’s deferred tax inventory. The impact of this valuation allowance is not material to the financial statements.

The tax benefit of a position taken or expected to be taken in a tax return should be recognized when it is more likely than not that the position will be sustained on its technical merits. The liability for unrecognized tax benefits was immaterial as of December 31, 2022, 2021 and 2020. The Company does not expect the liability for unrecognized tax benefits to change significantly during 2023. The Company recognizes interest and penalties, if any, related to income tax matters in income tax expense, and the amounts recognized during 2022, 2021 and 2020 were insignificant.

The Company and its subsidiaries file a consolidated U.S. federal income tax return, as well as filing various state returns. Generally, the federal returns for years prior to 2019 are no longer subject to examination. However, as a result of the 2020 federal NOL carryback, the 2015 to 2018 returns may still be subject to examination by the IRS. State returns that are open to examination vary by jurisdiction and are generally open three to four years.