Income Taxes

12 Months Ended

Dec. 31, 2019

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 the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):



	2019		2018
Allowance for loan losses	$	2,708	$	3,742
Deferred compensation payable	2,912		2,734
Underfunded pension liability	1,912		1,794
Accrued expenses	1,196		2,276
Impaired asset losses	703		1,201
Unrealized securities losses	—		1,871
Intangible assets	479		783
Other	6,584		6,492
Total Deferred Tax Assets	16,494		20,893

Unrealized securities gains	3,709		—
Other	6,116		3,555
Total Deferred Tax Liabilities	9,825		3,555
Net Deferred Tax Assets	$	6,669	$	17,338

No material valuation allowances for deferred tax assets were recorded at December 31, 2019 and 2018 as the Company believes it is more likely than not that all of the deferred tax assets will be realized because they were supported by recoverable taxes paid in prior years.

On December 22, 2017, the President signed the Tax Cut and Jobs Act ("TCJA") into law. Among other things, the TCJA reduced the corporate income tax rate from 35% to 21%, effective January 1, 2018. As a result of this decrease in the corporate income tax, the Company re-measured its deferred tax assets and liabilities, which resulted in a provisional charge to earnings of $7.1 million in 2017, which is included in total deferred tax expense in the table below. Upon final analysis of available information and refinement of the Company's calculations during 2018, the Company increased its provisional amount by $0.1 million, which is included as a component of income tax expense. Significant components of the provision for income taxes are as follows (in thousands):



	2019		2018			2017
Current:
Federal	$	16,636	$	16,846		$	20,090
State	2,560		2,413			1,436
Total current tax expense	19,196		19,259			21,526

Total deferred tax expense	4,939		(1,244		)	14,909
Income tax expense	$	24,135	$	18,015		$	36,435

A reconciliation of the significant differences between the federal statutory income tax rate and the Company’s effective income tax rate is as follows (in thousands):



	2019			2018			2017

Computed federal taxes at statutory rate	$	23,832		$	18,483		$	31,761
State income taxes, net of federal tax benefit	2,376			1,730			1,321
Tax effects of:
Tax-exempt interest income	(733		)	(694		)	(1,098		)
Bank-owned life insurance	(791		)	(649		)	(1,474		)
Change in statutory tax rate	—			—			7,070
Other items, net	(549		)	(855		)	(1,145		)
Income tax expense	$	24,135		$	18,015		$	36,435

The entire amount of the Company’s unrecognized tax benefits, if recognized, would favorably affect the Company’s effective tax rate. The Company anticipates that it will release $0.6 million over the next 12 months. A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows (in thousands):



	2019			2018

Beginning balance	$	1,811		$	1,889
Additions for current year tax positions	115			184
Additions for prior year tax positions	377			241
Decreases related to lapse of applicable statute of limitation	(496		)	(503		)
Ending balance	$	1,807		$	1,811

Interest and penalties on income tax uncertainties are included in income tax expense. During 2019, 2018 and 2017, the provision related to interest and penalties was approximately $0.6 million, $0.2 million, and $0.2 million, respectively. The balance of accrued interest and penalties at December 31, 2019 and 2018 was $0.7 million and $0.5 million, respectively.

The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and state taxing authorities for the years ended December 31, 2016 and forward.