Income Taxes

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The effective income tax rate was 21.9% for the second quarter of 2022, compared with 22.2% for the same prior year period. The effective tax rates for the first six months of 2022 and 2021 were 21.2% and 21.9%, respectively. These rates were reduced by nontaxable municipal interest income and nontaxable income from certain bank-owned life insurance (“BOLI”), and were increased by the non-deductibility of Federal Deposit Insurance Corporation (“FDIC”) premiums, certain executive compensation plans, and other fringe benefits. The tax rate for 2022 was lower than the tax rate for the same prior year period, primarily as a result of the proportional increase in nontaxable items and tax credits relative to pretax book income.

At June 30, 2022, we had a net deferred tax asset (“DTA”) totaling $722 million, compared with $96 million at December 31, 2021. On the consolidated balance sheet, the net DTA is included in “Other assets.” The increase in the net DTA was driven largely by the increase in unrealized losses in AOCI associated with investment securities and derivative instruments.

There was no valuation allowance at June 30, 2022 or December 31, 2021. We evaluate DTAs on a regular basis to determine whether a valuation allowance is required. In conducting this evaluation, we consider all available evidence, both positive and negative, based on the more-likely-than-not criteria that such assets will be realized. This evaluation includes, but is not limited to (1) available carryback potential to prior tax years; (2) potential future reversals of existing deferred tax liabilities, which historically have a reversal pattern generally consistent with DTAs; (3) potential tax planning strategies; and (4) future projected taxable income. Based on this evaluation, we concluded that a valuation allowance was not required at June 30, 2022.