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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income tax expense is as follows for the years indicated (in thousands):
 Year Ended December 31,
 202220212020
Current$67,612 $57,175 $42,688 
Deferred10,918 20,787 2,668 
Total income tax expense$78,530 $77,962 $45,356 
 
The differences between the provision for income taxes and the amount computed by applying the statutory federal income tax rate of 21% in 2022, 2021 and 2020 to income before income taxes are as follows for the years indicated (in thousands):
 Year Ended December 31,
 202220212020
Income tax expense on pretax income at statutory rates$74,760 $73,030 $43,983 
Add (deduct):
State taxes, net of federal benefit7,096 9,188 5,928 
BOLI earnings(1,379)(745)(1,052)
Adjustment to reserve for uncertain tax positions430 153 (1,212)
Tax-exempt interest revenue(3,015)(2,520)(2,169)
Equity compensation(1,313)(891)(174)
Transaction costs296 117 217 
Tax credit investments(694)(598)(930)
BOLI surrender1,746 — — 
Other603 228 765 
Total income tax expense$78,530 $77,962 $45,356 
The following summarizes the sources and expected tax consequences of future taxable deductions (revenue) which comprise the net DTA as of the dates indicated (in thousands):
 December 31,
 20222021
DTAs:  
ACL$38,409 $24,349 
Net operating loss carryforwards15,170 16,656 
Deferred compensation11,181 11,011 
Loan purchase accounting adjustments5,223 4,227 
Nonqualified share based compensation1,253 1,374 
Accrued expenses10,369 7,936 
Unamortized pension actuarial losses and prior service cost— 1,442 
Unrealized losses on AFS securities103,960 5,808 
Derivatives86 — 
Deferred gains on SBA/USDA loan sales1,683 2,217 
Lease liability10,105 7,501 
Other2,884 2,780 
Total DTAs200,323 85,301 
DTLs:
Unrealized gains on cash flow hedges4,507 1,189 
Acquired intangible assets4,707 2,412 
Premises and equipment9,314 5,179 
Loan origination costs8,855 6,466 
True tax leases8,748 5,984 
Servicing assets9,243 6,779 
Derivatives— 1,309 
ROU asset9,807 7,102 
Securities purchase accounting adjustments4,150 2,644 
BOLI surrender1,746 — 
Trust preferred securities debt issuance1,606 1,673 
Uncertain tax positions1,891 1,945 
Other5,514 386 
Total DTLs70,088 43,068 
Less valuation allowance922 911 
Net DTA$129,313 $41,322 
 
The change in the net DTA in 2022 includes an increase of $5.74 million due to current year merger and acquisition activity.
 
At December 31, 2022, United had:

•$19.1 million of state net operating loss carryforwards subject to annual limitation under IRC Section 382 that begin to expire in 2026, if not previously utilized.

•$24.4 million of state net operating loss carryforwards that begin to expire in 2025, if not previously utilized.

•$52.4 million in federal net operating loss carryforwards subject to annual limitation under IRC Section 382 that begin to expire in 2027, if not previously utilized.

•$3.24 million of state tax credits that begin to expire in 2023, if not previously utilized.
 
Management assesses the valuation allowance recorded against DTAs at each reporting period. The determination of whether a valuation allowance for DTAs is appropriate is subject to considerable judgment and requires an evaluation of all the positive and negative evidence. ASC 740 requires that companies assess whether a valuation allowance should be established against their DTAs based on the consideration of all available evidence using a “more likely than not” standard.
 
At December 31, 2022 and 2021, based on the assessment of all the positive and negative evidence, management concluded that it is more likely than not that nearly all of the net DTA will be realized based upon future taxable income. The valuation allowance of $922,000 and $911,000, respectively, was related to specific state income tax credits that have short carryforward periods and certain acquired state net operating losses, both of which are expected to expire unused.

The valuation allowance could fluctuate in future periods based on the assessment of the positive and negative evidence. Management’s conclusion at December 31, 2022 that it was more likely than not that the net DTA of $129.3 million will be realized is based on management’s estimate of future taxable income. Management’s estimate of future taxable income is based on internal forecasts which consider historical performance, various internal estimates and assumptions, as well as certain external data all of which management believes to be reasonable although inherently subject to significant judgment. If actual results differ significantly from the current estimates of future taxable income, even if caused by adverse macro-economic conditions, the valuation allowance may need to be increased for some or all of the net DTA.

A reconciliation of the beginning and ending unrecognized tax benefit related to uncertain tax positions is as follows for the years indicated (in thousands):
 202220212020
Balance at beginning of year$2,356 $2,163 $3,370 
Additions based on tax positions related to the current year962 634 421 
Decreases resulting from a lapse in the applicable statute of limitations(470)(441)(1,628)
Balance at end of year$2,848 $2,356 $2,163 
 
Approximately $2.25 million of the unrecognized tax benefit at December 31, 2022 would increase income from continuing operations, and thus affect United’s effective tax rate, if ultimately recognized into income.
 
It is United’s policy to recognize interest and penalties accrued relative to unrecognized tax benefits in their respective federal or state income taxes accounts. There were no penalties and interest related to income taxes recorded in the income statement in 2022, 2021 or 2020. No amounts were accrued for interest and penalties on the balance sheet at December 31, 2022 or 2021. 

United and its subsidiaries file a consolidated U.S. federal income tax return, as well as various state returns in the states where it operates. United’s federal and state income tax returns are no longer subject to examination by taxing authorities for years before 2019.