INCOME TAXES

At December 31, 2018, 2017 and 2016 income tax expense consisted of the following:



(Dollars in thousands)	2018			2017		2016
Current tax expense
Federal	$	95,151		$	87,992	$	84,946
State	21,523			6,116		7,493
Total current tax expense	116,674			94,108		92,439
Deferred tax expense (benefit)
Federal	(10,944		)	115,392		23,144
State	(2,433		)	10,446		10,002
Total deferred tax expense (benefit)	(13,377		)	125,838		33,146
Total income tax expense	$	103,297		$	219,946	$	125,585

Income tax expense differed from the amounts computed by applying the statutory federal income tax rate of 21 percent for 2018 and 35 percent for 2017 and 2016 to pretax income as a result of the following:



(Dollars in thousands)	2018			2017			2016
Income taxes at federal statutory rates	$	105,758		$	190,294		$	122,874
(Reduction) increase in income taxes resulting from:
Nontaxable income on loans, leases and investments, net of nondeductible expenses	(1,796		)	(2,525		)	(2,901		)
Nondeductible FDIC insurance expense	2,348			—			—
State and local income taxes, including change in valuation allowance, net of federal income tax benefit	15,081			10,765			11,372
Effect of federal rate change	(15,736		)	25,762			—
Tax credits net of amortization	(2,891		)	(4,840		)	(4,138		)
Other, net	533			490			(1,622		)
Total income tax expense	$	103,297		$	219,946		$	125,585

The net deferred tax asset included the following components at December 31, 2018 and 2017:



(Dollars in thousands)	2018		2017
Allowance for loan and lease losses	$	53,391	$	50,853
Pension liability	—		704
Executive separation from service agreements	7,927		8,548
Net operating loss carryforwards	6,862		2,685
Net unrealized loss included in comprehensive income	32,663		10,849
Employee compensation	11,145		4,192
FDIC assisted transactions timing differences	7,622		—
Other reserves	5,574		5,570
Other	9,555		5,924
Deferred tax asset	134,739		89,325
Accelerated depreciation	4,987		7,562
Lease financing activities	12,674		9,131
Net deferred loan fees and costs	10,651		8,708
Intangible assets	11,713		12,252
Security, loan and debt valuations	4,557		7,018
FDIC assisted transactions timing differences	—		1,113
Pension liability	6,287		—
Other	1,722		4,565
Deferred tax liability	52,591		50,349
Net deferred tax asset	$	82,148	$	38,976

At December 31, 2018, $28.6 million of existing gross deferred tax assets relate to federal net operating loss carryforwards and $15.4 million to state net operating loss carryforwards that expire in years beginning in 2024. The net operating losses were acquired through various acquisitions and are subject to the annual limitations set forth by Internal Revenue Code Section 382. No valuation allowance was necessary as of December 31, 2018, to reduce BancShares’ gross deferred tax asset to the amount that is more likely than not to be realized.

The Tax Act was enacted on December 22, 2017 which made broad changes to the U.S. tax code including a reduction in the federal corporate tax rate from 35 percent to 21 percent. The Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 118 to address uncertainty in applying ASC Topic 740 in the reporting period in which the Tax Act was enacted. Tax expense increased in the fourth quarter of 2017 by a provisional $25.8 million primarily attributable to the revaluation of our deferred tax assets to reflect the Tax Act changes. This was a provisional estimate made based upon the information available at the time of enactment. After receiving additional information during the third quarter of 2018, BancShares recorded a tax benefit of $15.7 million updating the provisional amount initially recorded in 2017. The nature of the additional information primarily related to a decision made by BancShares to accelerate deductions in its 2017 tax return which were effectuated by making an additional contribution to its pension plan and requesting an automatic change in its tax accounting method related to depreciation. Accounting for the Tax Act was completed during the fourth quarter of 2018 with no material changes.

During the first quarter of 2018, second quarter of 2017 and third quarter of 2016, BancShares adjusted its net deferred tax asset as a result of reductions in the North Carolina corporate income tax rate that were enacted June 28, 2017 and July 23, 2013, respectively. The lower corporate income tax rate resulted in a reduction in the deferred tax asset and an increase in income tax expense in 2018, 2017 and 2016. The lower state corporate income tax rate did not have a material impact on income tax expense.

BancShares' and its subsidiaries’ federal income tax returns for 2015 through 2017 remain open for examination. Generally, BancShares is no longer subject to examination by state and local taxing authorities for taxable years prior to 2012.

The following table provides a rollforward of BancShares’ gross unrecognized tax benefits, excluding interest and penalties, during the years ended December 31, 2018, 2017 and 2016:



(Dollars in thousands)	2018			2017			2016
Unrecognized tax benefits at the beginning of the year	$	29,004		$	28,879		$	5,975
Reductions related to tax positions taken in prior year	(1,054		)	(44		)	(327		)
Additions related to tax positions taken in current year	1,433			169			23,231
Reductions related to lapse of statute of limitations	(1,128		)	—			—
Unrecognized tax benefits at the end of the year	$	28,255		$	29,004		$	28,879

All of the unrecognized tax benefits, if recognized, would affect BancShares’ effective tax rate.

BancShares has unrecognized tax benefits relating to uncertain state tax positions in North Carolina and other state jurisdictions resulting from tax filings submitted to the states. No tax benefit has been recorded for these uncertain tax positions in the Consolidated Financial Statements. BancShares does not expect the unrecognized tax benefits to change significantly during 2019.

BancShares recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. For the years ended December 31, 2018, 2017 and 2016, BancShares recorded $564 thousand, $450 thousand and $357 thousand, respectively which primarily represent accrued interest.