Income Taxes

The following table presents the components of income tax provision included in the Consolidated Statements of Income for the years ended December 31:



(in thousands)	Current		Deferred		Total
YEAR ENDED DECEMBER 31, 2017:
Federal	$	19,287	$	56,171	$	75,458
State	10,015		10,463		20,478
	$	29,302	$	66,634	$	95,936
YEAR ENDED DECEMBER 31, 2016:
Federal	$	8,003	$	102,031	$	110,034
State	9,106		13,619		22,725
	$	17,109	$	115,650	$	132,759
YEAR ENDED DECEMBER 31, 2015:
Federal	$	22,914	$	81,267	$	104,181
State	1,708		18,699		20,407
	$	24,622	$	99,966	$	124,588

The following table presents a reconciliation of income taxes computed at the Federal statutory rate to the actual effective rate for the years ended December 31:



	2017		2016		2015
Statutory Federal income tax rate	35.0	%	35.0	%	35.0	%
State tax, net of Federal income tax	4.0	%	4.0	%	4.0	%
Revaluation effect of the Tax Cuts and Jobs Act of 2017	(8.2	)%	—	%	—	%
Tax-exempt income	(2.0	)%	(1.8	)%	(1.8	)%
BOLI	(1.1	)%	(0.9	)%	(1.1	)%
Tax credits	(0.4	)%	(0.3	)%	(0.1	)%
Nondeductible executive compensation	0.4	%	—	%	—	%
Other	0.4	%	0.3	%	(0.1	)%
Effective income tax rate	28.1	%	36.3	%	35.9	%

The revaluation effect of the Tax Cuts and Jobs Act of 2017 represents the revaluation of our net deferred tax liability and amortization of tax credit investments associated with the passage of the act in December 2017. While no provisional amounts were used in calculating the tax effects of the Tax Cuts and Jobs Act of 2017, certain amounts may be subject to change as future guidance is issued. Additionally, the state impacts resulting from the Federal legislation have been calculated based upon existing laws and may be subject to change as states issue new guidance or legislation related to the Act. We believe that all items calculated and presented herein will not materially change as a result of any future guidance or legislation. In addition, we have made an adjustment between retained earnings and accumulated other comprehensive income related to the stranded tax effects due to the change in the federal corporate tax rate applied on the unrealized gains (losses) on investments on a portfolio basis.

The following table reflects the effects of temporary differences that give rise to the components of the net deferred tax (liabilities) assets recorded on the consolidated balance sheets as of December 31:



(in thousands)	2017			2016
DEFERRED TAX ASSETS:
Allowance for loan and lease losses	$	36,566		$	52,360
Accrued severance and deferred compensation	17,497			25,565
Tax credit carryforwards	12,252			21,037
Unrealized losses on investment securities	5,158			9,275
Loan discount	3,565			16,623
Net operating loss carryforwards	2,159			48,121
Other	16,890			33,872
Total gross deferred tax assets	94,087			206,853

DEFERRED TAX LIABILITIES:
Residential mortgage servicing rights	40,414			57,858
Fair market value adjustment on junior subordinated debentures	26,538			45,958
Leases	19,673			8,259
Deferred loan fees and costs	18,146			23,800
Intangibles	12,969			18,710
Other	12,760			16,856
Total gross deferred tax liabilities	130,500			171,441

Valuation allowance	(1,090		)	(1,090		)

Net deferred tax (liabilities) assets	$	(37,503	)	$	34,322

The Company believes it is more likely than not that it will be able to fully realize the benefit of its federal NOL carryforwards. The Company also believes that it is more likely than not that the benefit from certain state NOL and tax credit carryforwards will not be realized and therefore has provided a valuation allowance of $1.1 million as of both December 31, 2017 and 2016, on the deferred tax assets relating to these state NOL and tax credit carry-forwards. The Company has determined that no other valuation allowance for the remaining deferred tax assets is required as management believes it is more likely than not that the remaining gross deferred tax assets, net of the valuation allowance, of $93.0 million and $205.8 million at December 31, 2017 and 2016, respectively, will be realized principally through future reversals of existing taxable temporary differences. Management further believes that future taxable income will be sufficient to realize the benefits of temporary deductible differences that cannot be realized through carryback to prior years or through the reversal of future temporary taxable differences.

The tax credit carryforwards consist of state tax credits of $4.3 million and $5.6 million at December 31, 2017 and 2016, respectively. The state tax credits will be utilized to offset future state income taxes. Most of the state tax credits benefit a five-year period, with an eight-year carryforward allowed. Federal low income housing credits, which have a twenty-year carryforward, totaled $7.9 million and $5.9 million at December 31, 2017 and 2016, respectively. Alternative minimum tax credits totaling $9.5 million at December 31, 2017, have become refundable under the Tax Cuts and Jobs Act of 2017 and have been relocated on the balance sheet from deferred tax asset to receivable. Alternative minimum tax credits totaled $9.5 million at December 31, 2016.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, as well as the majority of states and Canada. The Company is no longer subject to U.S. federal tax examinations for years before 2014, and no longer subject to other state tax authorities' examinations for years before 2013, except in California, for years before 2005, and for Canadian tax authority examinations for years before 2014.

The Company periodically reviews its income tax positions based on tax laws and regulations and financial reporting considerations, and records adjustments as appropriate. This review takes into consideration the status of current taxing authorities' examinations of the Company's tax returns, recent positions taken by the taxing authorities on similar transactions, if any, and the overall tax environment.

The Company had gross unrecognized tax benefits in the amounts of $3.1 million and $3.0 million recorded as of December 31, 2017 and 2016, respectively. If recognized, the unrecognized tax benefit would reduce the 2017 annual effective tax rate by 1%. As of December 31, 2017 and 2016, the accrued interest related to unrecognized tax benefits is $353,000 and $354,000, respectively.

Detailed below is a reconciliation of the Company's unrecognized tax benefits, gross of any related tax benefits, for the years ended December 31, 2017 and 2016, respectively:



(in thousands)	2017			2016
Balance, beginning of period	$	3,006		$	2,888
Changes for tax positions of current year	86			118
Changes for tax positions of prior years	—			561
Lapse of statute of limitations	(13		)	(561		)
Balance, end of period	$	3,079		$	3,006