
	2020		2019		2018
	(in thousands)
Current tax expense:
Federal	$	38,396	$	32,610	$	35,783
State	7,389		5,204		5,352
	45,785		37,814		41,135
Deferred tax (benefit) expense:
Federal	(18,131)		(1,271)		(16,841)
State	(3,460)		1,106		283
	(21,591)		(165)		(16,558)
Total income tax expense	$	24,194	$	37,649	$	24,577


	2020		2019		2018
Statutory tax rate	21.0	%	21.0	%	21.0	%
Tax credit investments	(5.7)		(4.6)		(6.1)
Tax-exempt income	(4.9)		(3.9)		(4.1)
Bank owned life insurance	(0.7)		(0.4)		(0.4)
State income taxes, net of federal benefit	1.1		0.2		2.0
Change in valuation allowance	—		1.8		(0.1)
Re-measurement of net DTA due to the Tax Act	—		—		(0.3)
Executive compensation	—		—		0.1

FDIC Premium	0.3		—		—
Penalties	0.2		—		—
Other, net	0.7		0.2		(1.6)
Effective income tax rate	12.0	%	14.3	%	10.5	%


	2020		2019
	(in thousands)
Deferred tax assets:
Allowance for credit losses	$	67,059	$	37,081
Tax credit carryforwards	39,294		43,133
State loss carryforwards	20,401		16,324
Tax credit investments	10,159		6,799
Other accrued expenses	9,801		8,797
Deferred compensation	8,486		7,752
Stock-based compensation	3,289		2,930
Postretirement and defined benefit plans	1,553		599


Other	12,107		4,246
Total gross deferred tax assets	172,149		127,661
Deferred tax liabilities:
Equipment lease financing	44,216		42,273
Unrealized holding gains on AFS securities	23,978		4,223
Premises and equipment	8,876		6,282
MSRs	6,414		8,686
Acquisition premiums/discounts	5,466		5,266
Intangible assets	1,205		1,136
Other	15,811		12,387
Total gross deferred tax liabilities	105,966		80,253
Net deferred tax asset, before valuation allowance	66,183		47,408
Valuation allowance	(20,401)		(16,324)
Net deferred tax asset	$	45,782	$	31,084

In assessing the realizability of DTAs, management considers whether it is more likely than not that some or all of the DTAs will not be realized. The ultimate realization of DTAs is dependent upon the generation of future taxable income and/or capital gain income during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies, such as those that may be implemented to generate capital gains, in making this assessment.

The valuation allowance relates to state net operating loss carryforwards for which realizability is uncertain. As of December 31, 2020 and 2019, the Corporation had state net operating loss carryforwards of approximately $263.6 million and $392.0 million, respectively, which are available to offset future state taxable income, and expire at various dates through 2040.

As of December 31, 2020, based on the level of historical taxable income and projections for future taxable income over the periods in which the DTAs are deductible, management believes it is more likely than not that the Corporation will realize the benefits of its DTAs, net of the valuation allowance.

As of December 31, 2020, the Corporation had tax credit carryforwards related to TCIs of approximately $39.3 million. The corporation recorded a DTA of $39.3 million, reflecting the benefit of these tax credit carryforwards. Such DTA will begin to expire in 2040 if not yet utilized.


	2020		2019		2018
	(in thousands)
Balance at beginning of year	$	2,517	$	2,726	$	2,550

Current period tax positions	95		292		593

Lapse of statute of limitations	(461)		(501)		(417)
Balance at end of year	$	2,151	$	2,517	$	2,726

Virtually all of the Corporation’s unrecognized tax benefits are for positions that are taken on an annual basis on state tax returns. Increases to unrecognized tax benefits will occur as a result of accruing for the nonrecognition of the position for the current year.

Decreases will occur as a result of the lapsing of the statute of limitations for the oldest outstanding year which includes the position. These offsetting increases and decreases are likely to continue in the future, including over the next twelve months. While the net effect on total unrecognized tax benefits during this period cannot be reasonably estimated, approximately $513,000 is expected to reverse in 2021 due to lapsing of the statute of limitations. Decreases can also occur throughout the settlement of positions with taxing authorities.

As of December 31, 2020, if recognized, all of the Corporation’s unrecognized tax benefits would impact the effective tax rate. Not included in the table above is $468,000 of federal income tax benefit on unrecognized state tax benefits which, if recognized, would also impact the effective tax rate. Interest accrued related to unrecognized tax benefits is recorded as a component of income tax expense. Penalties, if incurred, would also be recognized in income tax expense. The Corporation recognized approximately $(17,000) and $22,000 in 2020 and 2019, respectively, for interest and penalties in income tax expense related to unrecognized tax positions. As of December 31, 2020 and 2019, total accrued interest and penalties related to unrecognized tax positions were approximately $680,000 and $697,000, respectively.

The Corporation files income tax returns in the federal and various state jurisdictions. In most cases, unrecognized tax benefits are related to tax years that remain subject to examination by the relevant taxing authorities. With few exceptions, the Corporation is no longer subject to federal, state and local examinations by tax authorities for years before 2017.

The TCIs are included in other assets, with any unfunded equity commitments recorded in other liabilities on the consolidated balance sheets. Certain TCIs qualify for the proportional amortization method and are amortized over the period the Corporation expects to receive the tax credits, with the expense included within income taxes on the consolidated statements of income. Other TCIs are accounted for under the equity method of accounting, with amortization included within non-interest expense on the consolidated statements of income. This amortization includes equity in partnership losses and the systematic write-down of investments over the period in which income tax credits are earned. All of the TCIs are evaluated for impairment at the end of each reporting period.



		2020		2019
Included in other assets:		( in thousands)
Affordable housing tax credit investments, net		$	152,203	$	153,351
Other tax credit investments, net		59,224		64,354
	Total TCIs, net	$	211,427	$	217,705
Included in other liabilities:
Unfunded affordable housing tax credit commitments		$	31,562	$	16,684
Other tax credit liabilities		49,491		55,105
	Total unfunded tax credit commitments and liabilities	$	81,053	$	71,789


		2020		2019		2018
		( in thousands)
Components of income taxes:
Affordable housing tax credits and other tax benefits		$	(28,777)	$	(30,642)	$	(30,721)
Other tax credit investment credits and tax benefits		(4,163)		(4,542)		(6,385)
Amortization of affordable housing investments, net of tax benefit		20,429		22,184		21,569
Deferred tax expense		921		954		1,341
	Total reduction in income tax expense	$	(11,590)	$	(12,046)	$	(14,196)
Amortization of TCIs:
Affordable housing tax credits investment		$	4,087	$	3,344	$	3,355
Other tax credit investment amortization		2,039		2,677		8,094
	Total amortization of TCIs	$	6,126	$	6,021	$	11,449