INCOME TAXES

The TCJA includes several changes to existing U.S. tax laws that impact us, most notably a reduction of the U.S. corporate income tax rate from 35% to 21%, which became effective January 1, 2018. We recognized the initial income tax effects of the TCJA in our 2017 financial statements in accordance with Staff Accounting Bulletin No. 118, which provides SEC staff guidance for the application of ASC 740, Income Taxes, in the reporting period in which the TCJA was signed into law. We recorded a provisional amount of $54.0 million at December 31, 2017 related to the remeasurement of deferred tax balances. Upon final analysis of available information and refinement of our calculations during the nine months ended September 30, 2018, we decreased our provisional amount by $1.9 million which is included as a component of income tax expense from continuing operations. We consider the TCJA remeasurement of our deferred taxes to be complete.

Income Tax Expense

Federal and state income tax expense and the statutory tax rate and the actual effective tax rate consist of the following:

TABLE 13.1



	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2018			2017			2018			2017
Current income taxes:
Federal taxes	$	7,683		$	16,569		$	31,132		$	29,859
State taxes	1,145			406			3,894			1,991
Total current income taxes	8,828			16,975			35,026			31,850
Deferred income taxes:
Federal taxes	12,952			14,088			28,110			38,238
State taxes	374			2,115			757			(809		)
Total deferred income taxes	13,326			16,203			28,867			37,429
Total income taxes	$	22,154		$	33,178		$	63,893		$	69,279
Statutory tax rate	21.0		%	35.0		%	21.0		%	35.0		%
Effective tax rate	18.0		%	29.9		%	19.0		%	28.4		%

The effective tax rate for the nine months ended September 30, 2018 was lower than the statutory tax rate of 21% due to the recognized adjustments to our provisional TCJA deferred tax remeasurement, and the tax benefits resulting from tax-exempt income on investments, loans, tax credits and income from BOLI. The lower effective tax rate for the nine months ended September 30, 2017 primarily related to merger expenses and an increase in the level of tax credits.

In the fourth quarter of 2017, we elected to change our accounting policy under ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) to reclassify the income tax effects related to the TCJA from AOCI to retained earnings.

Deferred Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and tax purposes. Deferred tax assets and liabilities are measured based on the enacted tax rates that will apply in the years in which the temporary differences are expected to be recovered or paid. As such, during December 2017, we remeasured our deferred tax assets and liabilities as a result of the passage of the TCJA. The primary impact of this remeasurement was a reduction in deferred tax assets and liabilities in connection with the reduction of the U.S. corporate income tax rate from 35% to 21%.