INCOME TAXES

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

Note 17 – Income Taxes

The following table provides the components of income tax expense for the years ended December 31:

(In thousands)			2019		2018		2017
Current income taxes:
Federal			$	28,404	$	18,615	$	22,355
State				6,598		7,183		5,146
	Total current			35,002		25,798		27,501
Deferred income taxes:
Federal				234		4,808		6,973
State				1,192		1,218		252
	Total deferred			1,426		6,026		7,225
		Total income tax expense	$	36,428	$	31,824	$	34,726

The Company does not have uncertain tax positions that are deemed material, and did not recognize any adjustments for unrecognized tax benefits.Temporary differences between the amounts reported in the financial statements and the tax bases of assets and liabilities result in deferred taxes. Deferred tax assets and liabilities, shown as the sum of the appropriate tax effect for each significant type of temporary difference, are presented in the following table at December 31 for the years indicated:

(In thousands)				2019		2018
Deferred Tax Assets:
	Allowance for loan and lease losses			$	14,287	$	13,979
	Lease liability				19,616		-
	Fair value acquisition adjustments				1,322		2,253
	Employee benefits				4,535		4,339
	Pension plan OCI				2,845		3,228
	Deferred loan fees and costs				471		306
	Non-qualified stock option expense				659		457
	Unrealized losses on investments available-for-sale				-		2,343
	Losses on other real estate owned				201		202
	Other than temporary impairment				76		76
	Loan and deposit premium/discount				1,422		3,950
	Deferred rent				-		1,270
	Reserve for recourse loans				166		210
	Loss carryforward				916		1,323
	Tax credits carryforwards				-		251
	Other				159		280
		Gross deferred tax assets			46,675		34,467
		Valuation allowance			(880)		(644)
		Net deferred tax asset			45,795		33,823
Deferred Tax Liabilities:
	Right of use asset				(17,688)		-
	Unrealized gains on investments available-for-sale				(1,379)		-
	Pension plan costs				(2,373)		(2,607)
	Depreciation				(2,744)		(3,307)
	Intangible assets				(3,338)		(3,701)
	Bond accretion				(322)		(188)
	Section 481 adjustments				(1,335)		(2,053)
	Other				(585)		(404)
		Gross deferred tax liabilities			(29,764)		(12,260)
			Net deferred tax asset	$	16,031	$	21,563

The Company has approximately $0.7 million of federal net operating loss carryovers subject to the annual limitations under Internal Revenue Code Section 382 at December 31, 2019 from the WashingtonFirst acquisition. The net operating loss begins to expire in 2029. The Company has approximately $10.6 million of state net operating loss carryover which begins to expire in 2032. The Company believes that it is more likely than not that the future benefit from the state net operating loss carryover will not be realized. As such, there is a valuation allowance on the deferred tax assets of the jurisdictions in which the net operating losses relate.

The reconcilements between the statutory federal income tax rate and the effective rate for the years ended December 31 are presented in the following table:

(Dollars in thousands)			2019				2018				2017
					Percentage of				Percentage of				Percentage of
					Pre-Tax				Pre-Tax				Pre-Tax
			Amount		Income		Amount		Income		Amount		Income
Income tax expense at federal statutory rate			$	32,101	21.0	%	$	27,865	21.0	%	$	30,776	35.0	%
Increase (decrease) resulting from:
	Tax exempt income, net			(2,101)	(1.4)			(2,427)	(1.8)			(3,929)	(4.5)
	Bank-owned life insurance			(665)	(0.4)			(909)	(0.7)			(841)	(0.9)
	State income taxes, net of federal income tax benefits			6,154	4.0			6,637	5.0			3,508	4.0
	Federal tax rate change			-	-			-	-			5,544	6.3
	Other, net			939	0.6			658	0.5			(332)	(0.4)
		Total income tax expense and rate	$	36,428	23.8	%	$	31,824	24.0	%	$	34,726	39.5	%

The Tax Cuts and Jobs Act (the Act) was enacted on December 22, 2017. The Act reduced the U.S. federal corporate tax rate from 35% to 21% for years beginning on or after January 1, 2018. The Company recorded a provisional amount to deferred tax expense of $5.5 million in 2017, which was primarily due to a re-measurement deferred tax assets and liabilities at the newly enacted rate. Certain deferred tax assets and liabilities were re-measured based on the rates at which they are expected to reverse in the future, which is generally 21%. The Company completed an analysis on the impact of the Act in 2018 and determined that the provisional amount recorded in 2017 was reasonable, and that no further adjustments to deferred tax amounts are required. During 2018, the Company also adopted recently issued FASB guidance on reclassification of the tax effects stranded in OCI and reclassified $1.5 million from OCI to retained earnings.