Income Taxes (Tables)

9 Months Ended

Sep. 30, 2018

Summary of Differences in Taxes from Continuing Operations Computed at Statutory Rate

Following is a summary of the major items comprising the differences in taxes from continuing operations computed at the federal statutory rate and as recorded in the consolidated statements of income:

	Three Months Ended							Nine Months Ended
	September 30,							September 30,
(dollars in thousands)		2018				2017			2018				2017
Provision at statutory rate (1)	$	11,901			$	17,791		$	33,171			$	51,363
Tax-exempt income:
Tax-exempt interest		(2,179	)			(3,658	)		(6,607	)			(11,032	)
Section 291/265 interest disallowance		84				76			220				197
Company-owned life insurance income		(621	)			(708	)		(1,679	)			(2,201	)
Tax-exempt income		(2,716	)			(4,290	)		(8,066	)			(13,036	)
State income taxes		2,091				506			4,307				1,553
Interim period effective rate adjustment		(81	)			(861	)		944				(1,602	)
Tax credit investments - federal		(5,483	)			(1,684	)		(16,224	)			(5,431	)
Other, net		(387	)			(3	)		495				(313	)
Income tax expense	$	5,325			$	11,459		$	14,627			$	32,534
Effective tax rate		9.4		%		22.5	%		9.3		%		22.2	%

(1)

The statutory rate was 21% for the three and nine months ended September 30, 2018, compared to 35% for the three and nine months ended September 30, 2017.

Summary of Reconciliation of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amounts of unrecognized tax benefits was as follows:

	Nine Months Ended
	September 30,
(dollars in thousands)	2018			2017
Balance at beginning of period	$	874		$	777
Additions based on tax positions related to the current year		-			109
Reductions due to statute of limitations expiring		(301	)		(174	)
Reductions based on tax positions related to prior years		(78	)		-
Balance at end of period	$	495		$	712

Schedule of Significant Components of Net Deferred Tax Assets (Liabilities)

Significant components of net deferred tax assets (liabilities) were as follows at September 30, 2018 and December 31, 2017:

	September 30,			December 31,
(dollars in thousands)	2018			2017
Deferred Tax Assets
Allowance for loan losses, net of recapture	$	13,489		$	12,958
Benefit plan accruals		14,094			11,080
Alternative minimum tax credit		2,545			25,084
Unrealized losses on benefit plans		88			108
Net operating loss carryforwards		32,126			39,631
Federal tax credits		12,142			5,516
Other-than-temporary impairment		36			1,424
Deferred gain on securities		1,994			-
Acquired loans		21,759			29,669
Lease exit obligation		1,159			1,337
Unrealized losses on available-for-sale investment securities		22,921			14,011
Unrealized losses on held-to-maturity investment securities		2,600			3,630
Unrealized losses on hedges		-			923
Tax credit investments		2,007			-
Other real estate owned		182			369
Other, net		480			829
Total deferred tax assets		127,622			146,569
Deferred Tax Liabilities
Accretion on investment securities		(467	)		(493	)
Purchase accounting		(15,608	)		(16,718	)
Loan servicing rights		(6,006	)		(6,058	)
Premises and equipment		(7,099	)		(10,052	)
Prepaid expenses		(1,283	)		(1,277	)
Tax credit investments		-			(168	)
Unrealized gains on hedges		(864	)		-
Other, net		(1,628	)		(946	)
Total deferred tax liabilities		(32,955	)		(35,712	)
Net deferred tax assets	$	94,667		$	110,857