Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

4. INCOME TAXES

Our effective tax rate for the three and nine months ended September 30, 2022 was 20.7 percent and 20.0 percent, respectively, compared to 17.5 percent and 19.0 percent, respectively, for the same period in 2021. Effective rates are dependent upon components of pretax earnings and the related tax effects. The effective tax rate was higher for the three and nine-month periods in 2022, as higher pretax income, resulting from the gain on our sale of Maui Jim, decreased the percentage impact of tax-favored adjustments. The sale of Maui Jim also resulted in a larger current income taxes payable balance as of September 30, 2022.

Income tax expense attributable to income from operations for the three and nine-month periods ended September 30, 2022 and 2021 differed from the amounts computed by applying the U.S. federal tax rate of 21 percent to pretax income by the

items detailed in the below table. In interim periods, income taxes are adjusted to reflect the effective tax rate we anticipate for the year, with adjustments flowing through the other items, net line.

	For the Three Months Ended September 30, 2022								For the Nine Months Ended September 30, 2022
	2022				2021				2022				2021
(in thousands)	Amount		%		Amount		%		Amount		%		Amount		%
Provision for income taxes at the statutory rate of 21%	$	116,487	21.0	%	$	7,442	21.0	%	$	127,401	21.0	%	$	47,731	21.0	%
Increase (reduction) in taxes resulting from:
Excess tax benefit on share-based compensation		(95)	(0.0)	%		(225)	(0.6)	%		(2,270)	(0.4)	%		(2,419)	(1.1)	%
Tax exempt interest income		(280)	(0.1)	%		(298)	(0.8)	%		(850)	(0.1)	%		(927)	(0.4)	%
Dividends received deduction		(240)	(0.0)	%		(223)	(0.6)	%		(673)	(0.1)	%		(707)	(0.3)	%
Investment tax credit		(1,181)	(0.2)	%		(801)	(2.3)	%		(3,545)	(0.6)	%		(2,404)	(1.0)	%
ESOP dividends paid deduction		(136)	(0.0)	%		(132)	(0.4)	%		(404)	(0.0)	%		(399)	(0.2)	%
Nondeductible expenses		34	0.0	%		642	1.8	%		608	0.1	%		1,879	0.8	%
Other items, net		220	0.0	%		(211)	(0.6)	%		829	0.1	%		468	0.2	%
Total tax expense	$	114,809	20.7	%	$	6,194	17.5	%	$	121,096	20.0	%	$	43,222	19.0	%

We have recorded our deferred tax assets and liabilities using the statutory federal tax rate of 21 percent. We believe it is more likely than not that all deferred tax assets will be recovered, given the carry back availability as well as the result of future operations, which will generate sufficient taxable income to realize the deferred tax asset. Unrealized losses on the investment portfolio during 2022 have moved us from a net deferred tax liability position as of December 31, 2021 to a net deferred tax asset position as of September 30, 2022.