Income Taxes

12 Months Ended

Dec. 31, 2019

The current and deferred amounts of income tax expense (benefit) were as follows:


	Years Ended December 31,
($ in Thousands)	2019		2018		2017
Current
Federal	$	50,560	$	20,246	$	76,525
State	15,327		12,593		11,576
Total current	65,887		32,839		88,101
Deferred
Federal	14,094		34,941		19,755
State	(261)		12,006		1,647
Total deferred	13,833		46,947		21,402
Total income tax expense	$	79,720	$	79,786	$	109,503

Temporary differences between the amounts reported on the financial statements and the tax bases of assets and liabilities resulted in deferred taxes. Deferred tax assets and liabilities at December 31, 2019 and 2018 were as follows:


($ in Thousands)	2019		2018
Deferred tax assets
Allowance for loan losses	$	48,790	$	61,143
Allowance for other losses	7,236		8,304
Accrued liabilities	4,005		3,736
Deferred compensation	28,018		24,754
Benefit of tax loss and credit carryforwards	13,444		10,126
Nonaccrual interest	1,299		1,666
Net unrealized losses on available-for-sale securities	—		25,731
Net unrealized losses on pension and postretirement benefits	12,174		16,640
Other	3,495		1,916
Total deferred tax assets	118,461		154,015
Valuation allowance for deferred tax assets	(251)		(251)
Total deferred tax assets after valuation allowance	$	118,211	$	153,764

Deferred tax liabilities
Prepaid expenses	$	62,227	$	61,250
Goodwill	21,099		20,178
Mortgage banking activities	17,418		17,428
Deferred loan fee income	12,190		11,892
State deferred taxes	722		518
Lease financing	199		410
Bank premises and equipment	18,348		18,655
Purchase accounting	13,738		12,414
Deferred gains from equity securities and other investments	4,810		—
Net unrealized gains on available-for-sale securities	1,139		—
Other	1,156		684
Total deferred tax liabilities	$	153,045	$	143,429
Net deferred tax assets (liabilities)	$	(34,836)	$	10,335

At December 31, 2019 and December 31, 2018, the valuation allowance for deferred tax assets of approximately $251,000 was related to the deferred tax benefit of specific federal tax loss carryforwards of $3 million from a 2017 acquisition. The changes in the valuation allowance related to net operating losses for 2019 and 2018 were as follows:


($ in Thousands)	2019		2018
Valuation allowance for deferred tax assets, beginning of year	$	(251)	$	(269)
(Increase) decrease in current year	—		18
Valuation allowance for deferred tax assets, end of year	$	(251)	$	(251)

At December 31, 2019, the Corporation had state net operating loss carryforwards of $106 million (of which $49 million was acquired from various acquisitions) that will begin expiring in 2031. At December 31, 2019, the Corporation had state tax credit carryforwards of $5 million that will begin expiring in 2034.

The effective income tax rate differs from the statutory federal tax rate. The major reasons for this difference were as follows:


	2019		2018		2017
Federal income tax rate at statutory rate	21.0	%	21.0	%	35.0	%
Increases (decreases) resulting from:
Tax-exempt interest and dividends	(3.3)	%	(2.6)	%	(4.1)	%
State income taxes (net of federal benefit)	3.5	%	3.7	%	2.9	%
Bank owned life insurance	(0.8)	%	(0.7)	%	(1.7)	%
Tax effect of tax credits and benefits, net of related expenses	(0.9)	%	(0.7)	%	(0.7)	%
Tax reserve adjustments / settlements	0.2	%	1.5	%	(1.2)	%
Net tax benefit from stock-based compensation	(0.2)	%	(0.5)	%	(1.3)	%
Tax Act impact on deferred remeasurement	—	%	—	%	3.5	%
Tax planning in response to the Tax Act	—	%	(3.6)	%	—	%
FDIC premium	0.5	%	0.9	%	—	%
Other	(0.4)	%	0.3	%	(0.1)	%
Effective income tax rate	19.6	%	19.3	%	32.3	%

Savings banks acquired by the Corporation in 1997 and 2004 qualified under provisions of the Internal Revenue Code that permitted them to deduct from taxable income an allowance for bad debts that differed from the provision for such losses charged to income for financial reporting purposes. Accordingly, no provision for income taxes has been made for $100 million of retained income at December 31, 2019. If income taxes had been provided, the deferred tax liability would have been approximately $25 million. Management does not expect this amount to become taxable in the future; therefore, no provision for income taxes has been made.

The Corporation and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Corporation’s federal income tax returns are open and subject to examination from the 2016 tax return year and forward. The years open to examination by state and local government authorities varies by jurisdiction.

A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:


($ in Millions)	2019		2018
Balance at beginning of year	$	2	$	4
Subtractions for tax positions related to prior years	—		—
Subtractions for settlements with tax authorities	—		(3)
Additions for tax positions related to current year	1		1
Balance at end of year	$	3	$	2

At December 31, 2019 and 2018, the total amounts of unrecognized tax benefits that, if recognized, would affect the effective tax rate were $2 million and $1 million, respectively.

The Corporation recognizes interest and penalties accrued related to unrecognized tax benefits in the income tax expense line on the consolidated statements of income. Interest and penalty benefits were negligible at December 31, 2019 and $1 million December 31, 2018. Accrued interest and penalties were negligible at both December 31, 2019 and December 31, 2018. Management does not anticipate significant adjustments to the total amount of unrecognized tax benefits within the next twelve months.