Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Note 13 Income Taxes

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

	Years Ended December 31,
($ in Thousands)	2020		2019		2018
Current
Federal	$	33,020	$	50,560	$	20,246
State	16,193		15,327		12,593
Total current	49,213		65,887		32,839
Deferred
Federal	(25,895)		14,094		34,941
State	(3,118)		(261)		12,006
Total deferred	(29,013)		13,833		46,947
Total income tax expense	$	20,200	$	79,720	$	79,786

Temporary differences between the amounts reported on the financial statements and the tax bases of assets and liabilities resulted in deferred taxes. DTAs and liabilities at December 31, 2020 and 2019 were as follows:

($ in Thousands)	2020		2019
Deferred tax assets
Allowance for loan losses	$	88,967	$	48,790
Allowance for other losses	16,347		7,236
Accrued liabilities	4,673		4,005
Deferred compensation	27,896		28,018
Benefit of tax loss and credit carryforwards	9,789		13,444
Nonaccrual interest	1,763		1,299
Basis difference from equity securities and other investments	6,329		—
Net unrealized losses on pension and postretirement benefits	9,110		12,174
Other	997		970
Total deferred tax assets	$	165,871	$	115,936
Valuation allowance for deferred tax assets	(251)		(251)
Total deferred tax assets after valuation allowance	$	165,620	$	115,685
Deferred tax liabilities
Prepaid expenses	$	63,113	$	62,227
Goodwill	21,698		21,099
Mortgage banking activities	10,403		17,418
Deferred loan fee income	9,799		12,190
State deferred taxes	2,636		722
Lease financing	116		199
Bank premises and equipment	17,757		18,348
Purchase accounting	12,658		13,738
Basis difference from equity securities and other investments	—		2,285
Net unrealized gains on AFS securities	13,568		1,139
Other	1,049		1,156
Total deferred tax liabilities	$	152,797	$	150,521
Net deferred tax assets (liabilities)	$	12,823	$	(34,836)

At December 31, 2020 and December 31, 2019, the valuation allowance for DTAs 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 2020 and 2019 were as follows:

($ in Thousands)	2020		2019
Valuation allowance for deferred tax assets, beginning of year	$	(251)	$	(251)
(Increase) decrease in current year	—		—
Valuation allowance for deferred tax assets, end of year	$	(251)	$	(251)

At December 31, 2020, the Corporation had state net operating loss carryforwards of $92 million (of which $40 million was acquired from various acquisitions) that will begin expiring in 2031. At December 31, 2020, the Corporation had state income tax credit carryforwards of $2 million that will begin expiring in 2035.

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

	2020		2019		2018
Federal income tax rate at statutory rate	21.0 %		21.0 %		21.0 %
Increases (decreases) resulting from:
Tax-exempt interest and dividends	(3.9)	%	(3.3)	%	(2.6)	%
State income taxes (net of federal benefit)	3.7 %		3.5 %		3.7 %
Bank owned life insurance	(0.9)	%	(0.8)	%	(0.7)	%
Tax effect of tax credits and benefits, net of related expenses	(1.8)	%	(0.9)	%	(0.7)	%
Tax reserve adjustments / settlements	0.1 %		0.2 %		1.5 %
Net tax (benefit) expense from stock-based compensation	0.3 %		(0.2)	%	(0.5)	%
Tax planning in response to the Tax Act	—	%	—	%	(3.6)	%
Restructuring in conjunction with ABRC sale	(13.7)	%	—	%	—	%
FDIC premium	0.8 %		0.5 %		0.9 %
Other	0.6 %		(0.4)	%	0.3 %
Effective income tax rate	6.2	%	19.6	%	19.3 %

The decrease in the effective tax rate was primarily driven by corporate restructuring which allowed for the recognition of built in capital losses and tax basis step-up, which was done in conjunction with the sale of ABRC.

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, 2020. 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 2017 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)	2020		2019
Balance at beginning of year	$	3	$	2
Additions for tax positions related to current year	—		1
Balance at end of year	$	3	$	3

At December 31, 2020 and 2019, the total amounts of unrecognized tax benefits that, if recognized, would affect the effective tax rate were $3 million and $2 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, 2020 and December 31, 2019. Accrued interest and penalties were negligible at both December 31, 2020 and December 31, 2019. Management does not anticipate significant adjustments to the total amount of unrecognized tax benefits within the next twelve months.