Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes 

The following table presents the components of income tax provision for the years ended December 31, 2021, 2020, and 2019:

(in thousands)	Current		Deferred		Total
Year ended December 31, 2021:
Federal	$	71,969	$	32,099	$	104,068
State	25,086		8,706		33,792
Total provision for income taxes	$	97,055	$	40,805	$	137,860
Year ended December 31, 2020:
Federal	$	96,575	$	(46,556)	$	50,019
State	33,368		(16,387)		16,981
Total provision for income taxes	$	129,943	$	(62,943)	$	67,000
Year ended December 31, 2019:
Federal	$	90,227	$	(5,123)	$	85,104
State	28,125		1,579		29,704
Total provision for income taxes	$	118,352	$	(3,544)	$	114,808

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, 2021, 2020, and 2019:

	2021		2020		2019
Statutory Federal income tax rate	21.0	%	21.0	%	21.0	%
State tax, net of Federal benefit	5.6	%	(1.0)	%	5.0	%
Merger expenses	0.4	%	—	%	—	%
Low-income housing tax credits	(0.2)	%	0.1	%	(0.1)	%
State audit refunds	(0.2)	%	—	%	—	%
BOLI	(0.4)	%	0.2	%	(0.4)	%
Reversal of unrecognized tax benefits	(0.5)	%	—	%	—	%
Tax-exempt income	(0.9)	%	0.3	%	(1.2)	%
Impairment of goodwill	—	%	(25.0)	%	—	%
Other	(0.1)	%	(0.2)	%	0.2	%
Effective income tax rate	24.7	%	(4.6)	%	24.5	%

The following table reflects the effects of temporary differences that give rise to the components of the net deferred tax liabilities recorded in other liabilities on the consolidated balance sheets as of December 31, 2021 and 2020:

(in thousands)	December 31, 2021		December 31, 2020
Deferred tax assets:
Allowance for credit losses	$	65,182	$	86,120
Operating lease liabilities	24,556		29,239
Accrued severance and deferred compensation	17,343		16,729
Accrued bonuses	12,898		9,002
Other	25,700		35,362
Total gross deferred tax assets	145,679		176,452
Deferred tax liabilities:
Residential mortgage servicing rights	33,837		25,476
Direct financing leases	33,164		25,802
Fair market value adjustment on junior subordinated debentures	22,501		32,251
Deferred loan fees and costs	22,036		19,564
Operating lease right-of-use asset	21,195		27,010
Unrealized gains on investment securities	2,645		35,234
Other	14,654		15,466
Total gross deferred tax liabilities	150,032		180,803
Valuation allowance	—		(1,090)
Net deferred tax liabilities	$	(4,353)	$	(5,441)

As of December 31, 2021 and 2020, the Company's gross deferred tax assets included $800,000 and $1.5 million, respectively, of state NOL carryforwards expiring in tax years 2029-2031. For the year ended December 31, 2021, the Company has determined there is sufficient positive evidence to conclude that it is more likely than not that the benefit from certain state NOL carryforwards will be realized. The Company has reversed the entire valuation allowance of $1.1 million that was previously recorded as of December 31, 2020. 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 $145.7 million and $175.4 million at December 31, 2021 and 2020, 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 carry-back to prior years or through the reversal of future temporary taxable differences.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, as well as the majority of states. The

Company no longer files income tax returns in Canada. The Company is no longer subject to U.S. and Canadian tax examinations for years before 2018, and is no longer subject to state tax examinations for years prior to 2017.

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 no gross unrecognized tax benefits as of December 31, 2021, but had gross unrecognized tax benefits in the amount of $4.3 million recorded as of December 31, 2020. Interest on unrecognized tax benefits is reported by the Company as a component of tax expense.

During 2021, a settlement was entered into with the state of California for the 2012 and 2013 tax years resulting in the reversal of $2.2 million of gross unrecognized tax benefits. The 2021 gross unrecognized tax benefits also includes a $2.2 million reversal related to the closure of prior tax years due to the lapse of statutes of limitations.

Detailed below is a reconciliation of the Company's gross unrecognized tax benefits for the years ended December 31, 2021 and 2020, respectively:

(in thousands)	2021		2020
Balance, beginning of period	$	4,317	$	4,307
Changes for tax positions of current year	—		10
Settlement	(2,158)		—
Lapse of statute of limitations	(2,159)		—
Balance, end of period	$	—	$	4,317