On December 22, 2017, H.R.1, commonly known as the Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act reduced Wesbanco’s corporate federal rate from 35% to 21% effective January 1, 2018. As a result, Wesbanco was required to re-measure deferred tax assets and liabilities using the enacted rate at which Wesbanco expected them to be recovered or settled. The effect of this re-measurement was recorded to income tax expense in the year the tax law was enacted. Wesbanco recorded a provisional amount of $12.8 million at December 31, 2017 related to the re-measurement of deferred tax balances. Upon final analysis of available information and refinement of the calculation during 2018, Wesbanco increased the provisional amount by $0.1 million, which is included as a component of income tax expense from continuing operations. Wesbanco considered the Act’s re-measurement of deferred taxes to be complete in 2018.

Reconciliation from the federal statutory income tax rate to the effective tax rate is as follows:

	For the Years Ended December 31,
	2019			2018			2017
Federal statutory tax rate		21.0	%		21.0	%		35.0	%
Tax reform remeasurement		0.0	%		0.0	%		8.6	%
Net tax-exempt interest income on securities and loans of state and political subdivisions		(3.3	%)		(3.2	%)		(6.0	%)
State income taxes, net of federal tax effect		1.7	%		1.7	%		1.3	%
Bank-owned life insurance		(0.6	%)		(0.8	%)		(1.1	%)
General business credits		(2.2	%)		(1.6	%)		(1.7	%)
All other—net		1.2	%		0.9	%		0.2	%
Effective tax rate		17.8	%		18.0	%		36.3	%

The provision for income taxes applicable to income before taxes consists of the following:

	For the Years Ended December 31,
(in thousands)	2019		2018		2017
Current:
Federal	$	22,540	$	20,707	$	24,634
State		3,977		3,542		2,061
Deferred:
Tax reform remeasurement		—		—		12,765
Federal		7,736		6,864		13,329
State		88		299		1,018
Total	$	34,341	$	31,412	$	53,807

The following income tax amounts were recorded in shareholders’ equity as elements of other comprehensive income:

	December 31,
(in thousands)	2019			2018			2017
Deferred tax assets:
Allowance for loan losses	$	12,788		$	11,207		$	10,389
Compensation and benefits		7,144			5,851			2,536
Security gains		3,031			3,707			821
Purchase accounting adjustments		—			—			1,565
Non-accrual interest income		1,297			1,388			1,389
Tax credit carryforwards		149			—			5,204
Net operating loss carryforwards		6,923			4,854			6,062
Fair value adjustments on securities available-for-sale		—			6,345			3,962
Lease accrual		13,787			—			—
Other		2,314			2,125			1,118
Gross deferred tax assets		47,433			35,477			33,046
Deferred tax liabilities:
Depreciation and amortization		(4,014	)		(1,020	)		(1,883	)
Accretion on securities		(339	)		(461	)		(266	)
Deferred fees and costs		(2,388	)		(1,641	)		(2,989	)
Purchase accounting adjustments		(2,787	)		(1,003	)		—
Fair value adjustments on securities available-for-sale		(5,749	)		—			—
Partnership adjustments		(521	)		(680	)		(674	)
Lease - right of use assets		(13,064	)
Other		(40	)		(367	)		(120	)
Gross deferred tax liabilities		(28,902	)		(5,172	)		(5,932	)
Net deferred tax assets	$	18,531		$	30,305		$	27,114

No valuation allowance was established for any deferred tax assets, since management believes that deferred tax assets are likely to be realized through future reversals of existing taxable temporary differences and future taxable income.

As a result of the acquisition of YCB in 2016 and OLBK in 2019, Wesbanco has federal net operating loss (“NOL”) carryforwards of $32.0 million, which expire beginning in 2030 and 2036; respectively. Wesbanco has Indiana NOL carryforwards of $3.9 million, which expire in 2035, and Maryland NOL carryforwards of $18.0 million, which begin expiring in 2035. The use of the federal NOL and other carryforwards are limited by Internal Revenue Code Section 382, but they are expected to be utilized before their respective expiration dates. State tax NOL carryforwards are likewise expected to the utilized.

As a result of the previous acquisitions of YCB, ESB, Fidelity, Western Ohio Financial Corporation, Winton Financial Corporation and Oak Hill Financial, Inc., retained earnings at both December 31, 2019 and 2018 included $45.9 million of qualifying and non-qualifying tax bad debt reserves existing as of December 31, 1987, upon which no provision for income taxes has been recorded. The related amount of unrecognized deferred tax liability is $10.8 million for both 2019 and 2018. If this portion of retained earnings is used in the future for any purpose other than to absorb bad debts, it would be added to future taxable income.

Federal and state income taxes applicable to securities transactions totaled $1.0 million, $(0.2) million and $0.2 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Wesbanco had $0.4 million and $0.5 million of unrecognized tax benefits and interest as of December 31, 2019 and 2018, respectively. As of December 31, 2019, $0.5 million of these tax benefits would affect the effective tax rate if recognized. At December 31, 2019 and December 31, 2018, accrued interest related to uncertain tax positions was immaterial. Wesbanco provides for interest and penalties related to uncertain tax positions as part of its provision for federal and state income taxes.

Wesbanco is subject to U.S. federal income tax as well as to tax in various state income tax jurisdictions. Wesbanco and its prior acquired companies are no longer subject to any income tax examinations for years prior to 2016.

A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and the federal income tax benefit of unrecognized state tax benefits) is as follows:

	For the Years Ended December 31,
(in thousands)	2019			2018			2017
Balance at beginning of year	$	465		$	467		$	436
Additions based on tax positions related to the current year		58			68			101
Reductions for tax positions of prior years		—			—			—
Reductions due to the statute of limitations		(89	)		(70	)		(70	)
Settlements		—			—			—
Balance at end of year	$	434		$	465		$	467