INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

16. INCOME TAXES

Income taxes as set forth below produce effective income tax rates of 17.0% in 2023, 18.9% in 2022, and 17.7% in 2021. These percentages are computed by dividing Income tax expense by Income before income taxes.

Income tax expense includes the following components (in thousands):

	Year Ended December 31,
	2023			2022			2021
Current tax
Federal	$	81,565		$	92,673		$	72,410
State		10,452			13,964			16,356
Total current tax expense		92,017			106,637			88,766
Deferred tax
Federal		(19,438	)		(3,998	)		(9,872	)
State		(1,001	)		(2,310	)		(2,852	)
Total deferred tax benefit		(20,439	)		(6,308	)		(12,724	)
Total tax expense	$	71,578		$	100,329		$	76,042

The reconciliation between the income tax expense and the amount computed by applying the statutory federal tax rate of 21% for income before income taxes is as follows (in thousands):

	Year Ended December 31,
	2023			2022			2021
Statutory federal income tax expense	$	88,536		$	111,722		$	90,103
Tax-exempt interest income		(20,614	)		(20,206	)		(20,635	)
Tax-exempt life insurance related income		(4,961	)		(723	)		(2,631	)
Meals, entertainment and related expenses		1,582			854			580
State and local income taxes, net of federal tax benefits		7,466			9,207			10,659
Equity-based compensation		(1,377	)		(1,921	)		(1,889	)
Federal tax credits, net of amortization of LIHTC investments		(5,049	)		(3,748	)		(2,634	)
Other		5,995			5,144			2,489
Total tax expense	$	71,578		$	100,329		$	76,042

In preparing its tax returns, the Company is required to interpret tax laws and regulations to determine its taxable income. Periodically, the Company is subject to examinations by various taxing authorities that may give rise to differing interpretations of these laws. Upon examination, agreement of tax liabilities between the Company and the multiple tax jurisdictions in which the Company files tax returns may ultimately be different. The Company is in the examination process with two state tax authorities for tax years 2019 and 2020. The Company believes the aggregate amount of any additional liabilities that may result from these examinations, if any, will not have a material adverse effect on the financial condition, results of operations, or cash flows of the Company.

Deferred income taxes result from differences between the carrying value of assets and liabilities measured for financial reporting and the tax basis of assets and liabilities for income tax return purposes.

The significant components of deferred tax assets and liabilities are reflected in the following table (in thousands):

	December 31,
	2023			2022
Deferred tax assets:
Net unrealized loss on securities available for sale	$	202,804		$	248,001
Loans, principally due to allowance for credit losses		47,995			43,129
Equity-based compensation		7,446			7,743
Accrued expenses		35,779			25,007
Deferred compensation		17,918			15,375
Miscellaneous		3,617			2,289
Total deferred tax assets before valuation allowance		315,559			341,544
Valuation allowance		(3,286	)		(180	)
Total deferred tax assets		312,273			341,364
Deferred tax liabilities:
Net unrealized gain on fair value hedges		(17,855	)		(18,617	)
Net unrealized gain on cash flow hedges		(4,133	)		(1,798	)
Land, buildings and equipment		(27,772	)		(33,036	)
Original issue discount		(496	)		(992	)
Prepaid expenses		(6,672	)		(5,862	)
Partnership investments		(6,059	)		(6,737	)
Trust preferred securities		(6,673	)		(6,912	)
Intangibles		(16,843	)		(17,225	)
Miscellaneous		(3,574	)		(1,760	)
Total deferred tax liabilities		(90,077	)		(92,939	)
Net deferred tax asset	$	222,196		$	248,425

As of December 31, 2023, state net operating loss carryforwards of approximately $1.2 million are included in the miscellaneous deferred tax assets line item above. These deferred tax assets include approximately $34.1 million related to net operating loss carryforwards that can be used to offset taxable income in future periods and reduce our income taxes payable in those future periods. Most of these net operating losses expire at various times between 2024 and 2043 and some have an indefinite carryforward. During the year ended December 31, 2023, due to cumulative losses, the Company established a state valuation allowance of $2.1 million, against certain state deferred tax assets. As of December 31, 2023 and 2022, the Company had a valuation allowance of $1.2 million and $13 thousand, respectively, for certain state net operating losses as they are not expected to be realized. In addition, as of December 31, 2023 and 2022, the Company had a valuation allowance of $2.1 million and $167 thousand, respectively, to reduce certain other state deferred tax assets to the amount management believes will be more likely than not realized.

The net deferred tax asset at December 31, 2023 and December 31, 2022 are included in the Other assets line of the Company’s Consolidated Balance Sheets.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for tax years prior to 2018 in the jurisdictions in which it files.

Liabilities Associated With Unrecognized Tax Benefits

The gross amount of unrecognized tax benefits totaled $10.9 million and $9.4 million at December 31, 2023 and 2022, respectively. The total amount of unrecognized tax benefits, net of associated deferred tax benefit, that would impact the effective tax rate, if recognized, would be $8.6 million and $7.4 million at December 31, 2023 and December 31, 2022, respectively. The unrecognized tax benefits relate to state tax positions that have a corresponding federal tax benefit. While it is expected that the amount of unrecognized tax benefits will change in the next twelve months, the Company does not expect this change to have a material impact on the financial condition, results of operations, or cash flows of the Company.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	December 31,
	2023			2022
Unrecognized tax benefits - opening balance	$	9,360		$	8,798
Gross increases - tax positions in prior period		64			—
Gross decreases - tax positions in prior period		—			(63	)
Gross increases - current-period tax positions		2,807			2,621
Lapse of statute of limitations		(1,310	)		(1,996	)
Unrecognized tax benefits - ending balance	$	10,921		$	9,360