INCOME TAXES

6 Months Ended

Jun. 30, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

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 14.1

	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2023			2022			2023			2022
Current income taxes:
Federal taxes	$	36		$	22		$	67		$	29
State taxes	3			3			5			5
Total current income taxes	39			25			72			34
Deferred income taxes:
Federal taxes	(3)			3			(1)			8
State taxes	1			—			1			—
Total deferred income taxes	(2)			3			—			8
Total income taxes	$	37		$	28		$	72		$	42
Statutory federal tax rate	21.0		%	21.0		%	21.0		%	21.0		%
Effective tax rate	20.5			20.1			20.0			20.4

Income tax expense was higher for the six months ended June 30, 2023 due to higher pre-tax earnings as we had merger-related expenses from the Howard and Union acquisitions in 2022. The decrease in the effective tax rate for the six months ended June 30, 2023 compared to 2022 was primarily driven by higher deduction levels from employee stock compensation vesting.

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. Net deferred tax assets were $149.5 million and $147.7 million at June 30, 2023 and December 31, 2022, respectively.