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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes
NOTE 12 – INCOME TAXES
The components of the provision for income taxes are as follows:
202120202019
 (in thousands)
Current tax expense:
Federal$35,692 $38,397 $32,610 
State10,646 7,389 5,204 
46,338 45,786 37,814 
Deferred tax (benefit) expense:
Federal11,081 (18,131)(1,271)
State1,329 (3,460)1,106 
12,410 (21,591)(165)
Total income tax expense$58,748 $24,195 $37,649 
The differences between the effective income tax rate and the federal statutory income tax rate are as follows:
202120202019
Statutory tax rate21.0 %21.0 %21.0 %
Tax credit investments(3.0)(5.7)(4.6)
Tax-exempt income(3.0)(4.9)(3.9)
Bank owned life insurance(0.5)(0.7)(0.4)
State income taxes, net of federal benefit2.6 1.1 0.2 
Change in valuation allowance— — 1.8 
Executive compensation0.1 — — 
FDIC Premium0.3 0.3 — 
Penalties— 0.2 — 
Other, net0.1 0.7 0.2 
Effective income tax rate17.6 %12.0 %14.3 %
The net DTA recorded by the Corporation is included in other assets and consists of the following tax effects of temporary differences as of December 31:
20212020
(in thousands)
Deferred tax assets:
Allowance for credit losses$62,465 $67,059 
Tax credit carryforwards27,192 39,294 
State loss carryforwards23,996 20,401 
Lease Liability 21,034 — 
Tax credit investments11,203 10,159 
Other accrued expenses10,633 9,801 
Deferred compensation9,190 8,486 
Stock-based compensation3,499 3,289 
Postretirement and defined benefit plans— 1,553 
Other7,348 12,107 
Total gross deferred tax assets$176,560 $172,149 
Deferred tax liabilities:
Equipment lease financing$41,049 $44,216 
       Right-of-use-asset 18,671 — 
Unrealized holding gains on AFS securities10,432 23,978 
Premises and equipment9,151 8,876 
MSRs8,016 6,414 
Acquisition premiums/discounts5,466 5,466 
Intangible assets1,272 1,205 
       Postretirement and defined benefit plans1,243 — 
Other13,492 15,811 
Total gross deferred tax liabilities108,792 105,966 
Net deferred tax asset, before valuation allowance67,768 66,183 
Valuation allowance(23,996)(20,401)
Net deferred tax asset$43,772 $45,782 

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, 2021 and 2020, the Corporation had state net operating loss carryforwards of approximately $306.9 million and $263.6 million, respectively, which are available to offset future state taxable income, and expire at various dates through 2041.

As of December 31, 2021, 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, 2021, the Corporation had tax credit carryforwards related to TCIs of approximately $27.2 million. The Corporation recorded a DTA of $27.2 million, reflecting the benefit of these tax credit carryforwards. Such DTA will begin to expire in 2041 if not yet utilized.
Uncertain Tax Positions
The following table summarizes the changes in unrecognized tax benefits for the years ended December 31:
202120202019
(in thousands)
Balance at beginning of year$2,151 $2,517 $2,726 
Current period tax positions120 95 292 
Lapse of statute of limitations(598)(461)(501)
Balance at end of year$1,673 $2,151 $2,517 

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 $0.6 million is expected to reverse in 2022 due to lapsing of the statute of limitations. Decreases can also occur throughout the settlement of positions with taxing authorities.

As of December 31, 2021, if recognized, all of the Corporation’s unrecognized tax benefits would impact the effective tax rate. Not included in the table above is $0.4 million 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 $(75,000) and $(17,000) in 2021 and 2020, respectively, for interest and penalties in income tax expense related to unrecognized tax positions. As of December 31, 2021 and 2020, total accrued interest and penalties related to unrecognized tax positions were approximately $0.6 million and $0.7 million, 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 2018.

Tax Credit Investments

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.

The following table presents the balances of the Corporation's TCIs and related unfunded commitments as of December 31:
20212020
Included in other assets:( in thousands)
Affordable housing tax credit investments, net$161,052 $152,203 
Other tax credit investments, net42,987 59,224 
Total TCIs, net$204,039 $211,427 
Included in other liabilities:
Unfunded affordable housing tax credit commitments$49,364 $31,562 
Other tax credit liabilities33,941 49,491 
Total unfunded tax credit commitments and liabilities$83,305 $81,053 
The following table presents other information relating to the Corporation's TCIs for the years ended December 31:
202120202019
( in thousands)
Components of income taxes:
Tax credits and benefits(28,141)(32,940)(35,184)
Amortization of tax credits and benefits, net of tax benefits17,378 20,429 22,184 
Deferred tax expense639 921 954 
Total reduction in income tax expense$(10,124)$(11,590)$(12,046)
Amortization of TCIs:
Total amortization of TCIs$6,187 $6,126 $6,021