Income Taxes

6 Months Ended

Jun. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

BancShares’ global effective income tax rates were 23.9% and 1.6% for the three and six months ended June 30, 2023, respectively, and 24.2% and 6.3% for the three and six months ended June 30, 2022, respectively. While the effective tax rates for the three months ended June 30, 2023 and 2022 were relatively consistent, the decrease from 6.3% in the prior year to 1.6% for the six months ended June 30, 2023 was primarily due to the preliminary gain on acquisition relating to the SVBB Acquisition.

The quarterly income tax expense is based on a projection of BancShares’ annual effective tax rate (“ETR”). This annual ETR is applied to the year-to-date consolidated pre-tax income to determine the interim provision for income taxes before discrete items. The ETR each period is also impacted by a number of factors, including the relative mix of domestic and international earnings, effects of changes in enacted tax laws, adjustments to the valuation allowances, and discrete items. The currently forecasted ETR may vary from the actual year-end 2023 ETR due to the changes in these factors.

Uncertain Tax Benefits

BancShares’ recognizes tax benefits when it is more likely than not that the position will prevail, based solely on the technical merits under the tax law of the relevant jurisdiction. BancShares will recognize the tax benefit if the position meets this recognition threshold determined based on the largest amount of the benefit that is more than likely to be realized.

Net Operating Loss Carryforwards and Valuation Adjustments

As a result of the SVBB Acquisition, BancShares’ net deferred tax liabilities increased by approximately $3.28 billion, primarily related to acquired loans and other assets.

BancShares’ ability to recognize deferred tax assets (“DTAs”) is evaluated on a quarterly basis to determine if there are any significant events that would affect our ability to utilize existing DTAs. If events are identified that affect our ability to utilize its DTAs, adjustments to the valuation allowance adjustments may be required. As a result of further assessment of information received during the second quarter related to the SVBB Acquisition, BancShares released approximately $12 million in the quarter of the $70 million valuation allowance recorded at December 31, 2022.