	For the Year Ended December 31,
(In thousands)	2018		2017		2016
Current:
Federal	$	36,862	$	33,799	$	24,394
State		3,791		2,458		2,166
Total current expense		40,653		36,257		26,560
Deferred:
Federal		3,791		44,009		5,439
State		673		380		541
Total deferred expense		4,464		44,389		5,980
Total income tax expense	$	45,117	$	80,646	$	32,540

Income tax expense as shown in the consolidated statements of income differed from the amounts computed by applying the U.S. federal income statutory rate to income before income taxes. The statutory rate is 21% for the year ended December 31, 2018 and 35% for the years ended December 31, 2017 and 2016. A reconciliation of the differences is presented below:

	For the Year Ended December 31,
(In thousands)	2018			2017			2016
Computed income tax expense at statutory rate	$	44,389		$	64,050		$	34,410
Effects of tax reform		(284	)	$	19,022			—
Tax exempt interest, net		(1,609	)		(3,988	)		(2,744	)
BOLI income		(717	)		(1,148	)		(1,023	)
State tax expense		3,527			2,279			1,760
Goodwill writeoff on sale of subsidiary assets		2,254			—			—
One-time bad debt deduction on legacy loan portfolio		(5,565	)		—			—
Other, net		3,122			431			137
Total income tax expense	$	45,117		$	80,646		$	32,540

As a result of Tax Reform enacted on December 22, 2017, deferred taxes are based on the newly enacted U.S. federal statutory income tax rate of 21%. In 2017, the provisional amount recorded related to the remeasurement of the Company’s deferred tax asset was $19.0 million, which was recorded as income tax expense. The Company completed its analysis of the remeasurement of the Company’s deferred tax asset within the measurement period and the amount is not materially different from the provisional amount recorded in 2017.

The significant components of the Company’s deferred tax assets and liabilities as of December 31, 2018 and 2017 are as follows:

	As of December 31,
(In thousands)	2018		2017
Deferred income tax assets:
Allowance for credit losses	$	20,256	$	18,464
Deferred compensation		3,338		3,440
Accrued compensation		3,630		2,506
Net operating loss carryforwards		8,893		9,859
Alternative minimum tax credit carryover		978		978
Unrealized loss on securities, net		7,910		1,271
Unrealized loss on derivative instruments		5,496		4,912
Other		3,588		6,198
Total deferred income tax assets		54,089		47,628
Deferred income tax liabilities:
Difference in book and tax basis of intangibles		1,573		1,927
Other		6,239		4,213
Excess of book basis in assets acquired and tax liabilities assumed over book carrying value:
Intangibles		9,473		7,122
Other		3,580		3,592
Total deferred income tax liabilities		20,865		16,854
Net deferred income tax asset	$	33,224	$	30,774

ASC Topic 740, “Income Taxes,” requires that deferred tax assets be reduced if it is more likely than not that some portion or all of the deferred tax asset will not be realized. Management’s determination of the realizability of deferred tax assets is based on its evaluation of all available evidence both positive and negative, and its expectation regarding various future events, including the reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. Positive evidence supporting the realization of the Company’s deferred tax assets at December 31, 2018, includes generation of taxable income since 2012, the Company’s strong capital position, as well as sufficient amounts of projected future taxable income, of the appropriate character, to support the realization of the $54.1 million at December 31, 2018. In order to fully realize the deferred tax asset, the Company will need to generate future taxable income of $191.2 million before the end of the statutory net operating loss carryforward period. Based on the assessment of all positive and negative evidence at December 31, 2018 and 2017, management has concluded that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.

Management’s estimate of future taxable income is based on internal projections, various internal assumptions, as well as certain external data all of which management believes to be reasonable although inherently subject to significant judgment. Projected future taxable income is primarily expected to be generated through loan growth at the bank, investment strategies and revenue from successful cross initiatives and the control of expenses through operating effectiveness, all in the context of a macro-economic environment that continues to trend favorably. If actual results differ significantly from the current estimates of future taxable income, a valuation allowance may need to be recorded for some portion or all of the net deferred tax asset. Such an increase to the deferred tax asset valuation allowance could have a material adverse effect on the Company’s consolidated balance sheets and consolidated statements of income.

The acquisitions of Cadence Financial Corporation and Encore resulted in an "ownership change" as defined for U.S. federal income tax purposes under Section 382 of the Internal Revenue Code. As a result of the operation of Section 382, the Company is not able to fully utilize a portion of our U.S. federal and state tax net operating losses and certain built-in losses that have not been recognized for tax purposes. An ownership change under Section 382 generally occurs when a change in the aggregate percentage ownership of the stock of the corporation held by five percent stockholders increases by more than fifty percentage points over a rolling three-year period. A corporation experiencing an ownership change generally is subject to an annual limitation on its utilization of pre-change losses and certain post-change recognized built-in losses equal to the value of the stock of the corporation immediately before the ownership change, multiplied by the long-term tax-exempt rate (subject to certain adjustments). The annual limitation is increased each year to the extent that there is an unused limitation in a prior year. Since U.S. federal net operating losses generally may be carried forward for up to 20 years, the annual limitation also effectively provides a cap on the cumulative amount of pre-change losses and certain post-change recognized built-in losses that may be utilized. Pre-change losses and certain post-change recognized built-in losses in excess of the cap are effectively unable to be used to reduce future taxable income. The Company has estimated the amount of pre-change losses and certain post-change losses that are not expected to be utilized and has reduced the deferred tax asset at the acquisition date to reflect this limitation.

The acquisition of Superior Bank was an asset acquisition and is not subject to the limitations of Section 382.

As of December 31, 2018, the Company has federal net operating loss carryforwards of $37.9 million which will begin to expire in 2031. The Company has state net operating loss carryforwards of $21.2 million which will begin to expire in 2023. In addition, the Company has an AMT credit carryforward of $978,000 as of December 31, 2018, which has no expiration.

The Company and its subsidiaries are subject to U.S. federal income tax as well as various state and local income taxes. With certain limited exceptions, the Company has concluded all U.S. federal and state income tax matters for years before 2015. The Company applies the guidance in ASC 740-10, “Accounting for Uncertainty in Income Taxes.” ASC 740-10 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. ASC 740-10 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more likely than not” to be sustained by the applicable tax authority based on technical merits of the position. Tax benefits from tax positions not deemed to meet the “more likely than not” threshold should not be recognized in the year of determination.

A reconciliation of the beginning and ending amount of unrecognized income tax benefits is as follows (unrecognized state income tax benefits are not adjusted for the federal income tax impact):

	For the Year Ended December 31,
(In thousands)	2018			2017			2016
Unrecognized income tax benefits	$	894		$	944		$	—
Increases for tax positions related to:
Prior years		—			9			422
Current year		479			394			522
Decreases for tax positions related to:
Prior years		(101	)		(453	)		—
Current year		—			—			—
Settlement with taxing authorities		—			—			—
Expiration of applicable statutes of limitations		—			—			—
Unrecognized income tax benefits	$	1,272		$	894		$	944

As of December 31, 2018 and 2017, the balance of unrecognized tax benefits, if recognized, that would reduce the effective tax rate is $1.0 million and $0.6 million, respectively. The Company does not anticipate a significant change to the total amount of unrecognized tax benefits with the next 12 months.

The Company classifies interest and penalties on uncertain tax positions as a component of noninterest expense. During the years ended December 31, 2018 and 2017, the Company recognized approximately $57,000 and $(4,000) in interest and penalties. The Company’s accrued interest and penalties on unrecognized tax benefits was $137,000 and $88,000 as of December 31, 2018 and 2017, respectively. Accrued interest and penalties are included in other liabilities.