Federal and State Income Taxes

12 Months Ended

Dec. 31, 2018

The following table is a summary of consolidated income tax expense:


	Years ended
(Dollars in thousands)	December 31, 2020		December 31, 2019	December 31, 2018
Current
Federal	$	47,775	34,461	21,510
State	20,728		14,545	11,960
Total current income tax expense	68,503		49,006	33,470
Deferred 1
Federal	(5,396)		(279)	5,372
State	(1,467)		(77)	1,489
Total deferred income tax (benefit) expense	(6,863)		(356)	6,861
Total income tax expense	$	61,640	48,650	40,331

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1 Includes tax benefit of operating loss carryforwards of $315,000, $317,000 and $443,000 for the years ended December 31, 2020, 2019, and 2018, respectively.

Combined federal and state income tax expense differs from that computed at the federal statutory corporate income tax rate as follows:


	Years ended
	December 31, 2020		December 31, 2019		December 31, 2018
Federal statutory rate	21.0	%	21.0	%	21.0	%
State taxes, net of federal income tax benefit	4.6	%	4.4	%	4.8	%

Tax-exempt interest income	(4.0	%)	(3.7	%)	(5.0	%)
Tax credits	(4.2	%)	(4.5	%)	(4.2	%)
Other, net	1.4	%	1.6	%	1.6	%
Effective income tax rate	18.8	%	18.8	%	18.2	%

The tax effect of temporary differences which give rise to a significant portion of deferred tax assets and deferred tax liabilities are as follows:


(Dollars in thousands)	December 31, 2020		December 31, 2019
Deferred tax assets
Allowance for credit losses	$	44,040	31,698
Operating lease liabilities	12,551		11,127
Employee benefits	9,309		6,646
Deferred compensation	7,638		7,447
Acquisition fair market value adjustments	4,398		5,480
Net operating loss carryforwards	1,884		2,209



Other	2,262		3,891
Total gross deferred tax assets	82,082		68,498
Deferred tax liabilities
Available-for-sale debt securities	(48,505)		(13,652)
Intangibles	(14,671)		(16,469)
Depreciation of premises and equipment	(14,654)		(13,987)
Operating lease ROU assets	(11,830)		(10,506)

Deferred loan costs	(8,940)		(7,311)

Mortgage servicing rights	(2,268)		(411)
Other	(5,074)		(4,125)
Total gross deferred tax liabilities	(105,942)		(66,461)
Net deferred tax asset	$	(23,860)	2,037

The Company has federal net operating loss carryforwards of $6,739,071 expiring between 2024 and 2036. The Company has Colorado net operating loss carryforwards of $10,989,735 expiring between 2030 and 2035. The net operating loss carryforwards originated from acquisitions.

The Company and the Bank file consolidated income tax returns for the federal jurisdiction and several states that require consolidated income tax returns. Wyoming, Washington and Nevada do not impose a corporate income tax. All required income tax returns have been timely filed. The following schedule summarizes the years that remain subject to examination as of December 31, 2020:


			Years ended December 31,
Federal			2010, 2011, 2012, 2013, 2016, 2017, 2018 and 2019
Colorado			2010, 2011, 2012, 2016, 2017, 2018, and 2019
Arizona & California			2016, 2017, 2018 and 2019
Montana, Idaho, Utah, & North Dakota			2017, 2018 and 2019
Alabama, Alaska, Arkansas, Connecticut, Florida, Georgia, Indiana, Kentucky, Louisiana, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, & Wisconsin			2019

The Company had no unrecognized income tax benefits as of December 31, 2020 and 2019. The Company recognizes interest related to unrecognized income tax benefits in interest expense and penalties are recognized in other expense. Interest expense and penalties recognized with respect to income tax liabilities for the years ended December 31, 2020, 2019, and 2018 was not significant. The Company had no accrued liabilities for the payment of interest or penalties at December 31, 2020 and 2019.

The Company has assessed the need for a valuation allowance and determined that a valuation allowance was not necessary at December 31, 2020 and 2019. The Company believes that it is more-likely-than-not that the Company’s deferred tax assets will be realizable by offsetting future taxable income from reversing taxable temporary differences and anticipated future taxable income (exclusive of reversing temporary differences). In its assessment, the Company considered its strong earnings history, no history of income tax credit carryforwards expiring unused, and no expected future net operating losses (for tax purposes).

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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