Income Taxes

3 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The effective income tax rate was 27.7% for the first quarter of 2023, compared with 20.4% for the first quarter of 2022. The tax rates during both periods 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 the first quarter of 2023 was higher relative to the same prior year period, primarily as a result of a discrete item that affected the reserve for uncertain tax positions during the current quarter. Discrete items accounted for a four percentage point increase to the effective tax rate during the first quarter of 2023, compared with a two percentage point decrease in the prior year quarter.

At both March 31, 2023 and December 31, 2022, we had a net deferred tax asset (“DTA”) totaling $1.1 billion. On the consolidated balance sheet, the net DTA is included in “Other assets.”

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, the following:

•Future reversals of existing deferred tax liabilities (“DTLs”) — These DTLs have a reversal pattern generally consistent with DTAs, and are used to realize the DTAs.

•Tax planning strategies — We have considered prudent and feasible tax planning strategies that we would implement to preserve the value of the DTAs, if necessary.

•Future projected taxable income — We expect future taxable income will offset the reversal of remaining net DTAs.

Based on this evaluation, we concluded that a valuation allowance was not required at both March 31, 2023 and December 31, 2022.