Income Taxes

The components of income tax expense from operations for the years ended December 31, 2018, 2017 and 2016 were as follows:



(In thousands)	Current		Deferred			Total
Year ended December 31, 2018:
U.S. federal	$	90,390	$	3,220		$	93,610
State and local	10,223		2,116			12,339
Total	$	100,613	$	5,336		$	105,949
Year ended December 31, 2017:
U.S. federal	$	89,154	$	12,190		$	101,344
State and local	7,735		1,427			9,162
Total	$	96,889	$	13,617		$	110,506
Year ended December 31, 2016:
U.S. federal	$	116,753	$	(2,036	)	$	114,717
State and local	9,457		(23		)	9,434
Total	$	126,210	$	(2,059	)	$	124,151

The components of income tax (benefit) expense recorded directly to stockholders’ equity for the years ended December 31, 2018, 2017 and 2016 were as follows:



(In thousands)	2018			2017			2016
Unrealized gain (loss) on available for sale debt securities	$	(18,634	)	$	2,104		$	(13,952	)
Change in fair value on cash flow hedges	2,286			—			—
Accumulated pension (benefit) loss	222			(184		)	778
Compensation expense for tax purposes in excess of amounts recognized for financial reporting purposes	—			—			(3,390		)
Income tax (benefit) expense allocated to stockholders’ equity	$	(16,126	)	$	1,920		$	(16,564	)

Significant components of the Company’s deferred tax assets and liabilities at December 31, 2018 and 2017 were as follows:



(In thousands)	2018			2017
Deferred tax assets:
Loans, principally due to allowance for loan losses	$	39,169		$	40,341
Unrealized loss on available for sale debt securities	16,140			—
Equity-based compensation	7,609			8,201
Deferred compensation	5,911			5,647
Unearned fee income	4,125			3,701
Accrued expenses	2,152			5,245
Private equity investments	2,008			5,473
Other	528			4,430
Total deferred tax assets	77,642			73,038
Deferred tax liabilities:
Equipment lease financing	55,738			45,825
Unrealized gain on available for sale debt securities	—			13,603
Land, buildings and equipment	14,207			8,592
Undistributed earnings of subsidiaries	—			7,094
Intangibles	5,973			5,732
Other	5,309			6,569
Total deferred tax liabilities	81,227			87,415
Net deferred tax liabilities	$	(3,585	)	$	(14,377	)

Management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the total deferred tax assets.

As a result of the Tax Cuts and Jobs Act enacted on December 22, 2017, the Company revalued its deferred tax assets and liabilities using the highest maximum corporate tax rate of 21%. This change was reported as a reduction of deferred tax expense. The Company also adopted ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting," on January 1, 2017. This adoption required all excess tax benefits and tax deficiencies arising from share-based award payments to be recognized as income tax expense or benefit in the statements of income, while in previous periods these benefits and deficiencies were recognized in equity. In 2018 and 2017, net excess tax benefits resulted from share-based award payments. The effects on federal tax expense of both of these items are shown in the reconciliation below.

A reconciliation between the expected federal income tax expense using the federal statutory tax rate and the Company's actual income tax expense is provided below. The federal statutory tax rate was 21% in 2018 and 35% in 2017 and 2016. The effective tax rate is calculated by dividing income taxes by income before income taxes less the non-controlling interest expense.



(In thousands)	2018			2017			2016
Computed “expected” tax expense	$	113,293		$	150,461		$	139,840
Increase (decrease) in income taxes resulting from:
Tax-exempt interest, net of cost to carry	(11,502		)	(20,295		)	(20,033		)
Contribution of appreciated securities	—			(10,864		)	—
State and local income taxes, net of federal tax benefit	9,748			5,955			6,132
Tax reform enactment	—			(6,753		)	—
Share-based award payments	(3,928		)	(6,613		)	—
Other	(1,662		)	(1,385		)	(1,788		)
Total income tax expense	$	105,949		$	110,506		$	124,151

The gross amount of unrecognized tax benefits was $1.3 million and $1.2 million at December 31, 2018 and 2017, respectively, and the total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, was $993 thousand and $785 thousand, respectively. The activity in the accrued liability for unrecognized tax benefits for the years ended December 31, 2018 and 2017 was as follows:



(In thousands)	2018			2017
Unrecognized tax benefits at beginning of year	$	1,208		$	1,228
Gross increases – tax positions in prior period	31			5
Gross increases – current-period tax positions	322			268
Lapse of statute of limitations	(304		)	(293		)
Unrecognized tax benefits at end of year	$	1,257		$	1,208

The Company and its subsidiaries are subject to income tax by federal, state and local government taxing authorities. Tax years 2015 through 2018 remain open to examination for U.S. federal income tax, and tax years 2014 through 2018 remain open to examination in major state taxing jurisdictions.