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Income Taxes
12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES

The current and deferred components of income tax expense on the consolidated statements of income were as follows:
 
 
For The Year Ended
December 31,
(In thousands)
 
2019
 
2018
 
2017
Current:
 
  

 
  

 
  

Federal
 
$
11,876

 
$
14,102

 
$
14,529

State
 
1,241

 
1,206

 
1,289

  
 
13,117

 
15,308

 
15,818

Deferred:
 
  

 
  

 
  

Federal
 
1,230

 
(2,541
)
 
4,117

State
 
29

 
(61
)
 
(320
)
Change in federal corporate income tax rate(1)
 

 

 
14,263

 
 
1,259

 
(2,602
)
 
18,060

Income tax expense
 
$
14,376

 
$
12,706

 
$
33,878



The income tax expense differs from the amount computed by applying the statutory federal income tax rate as a result of the following:
 
 
For The Year Ended
December 31,
(Dollars in thousands)
 
2019
 
2018
 
2017
Computed tax expense(1)
 
$
15,032

 
$
13,813

 
$
21,824

Increase (reduction) in income taxes resulting from:
 
 
 
 
 
 
State taxes, net of federal benefit
 
1,003

 
905

 
630

Tax exempt income
 
(738
)
 
(741
)
 
(1,291
)
Income from life insurance
 
(509
)
 
(510
)
 
(829
)
Low income housing credits
 
(430
)
 
(465
)
 
(366
)
Share-based awards
 
(60
)
 
(250
)
 
(390
)
Change in federal corporate income tax rate(1)
 

 

 
14,263

Other
 
78

 
(46
)
 
37

Income tax expense
 
$
14,376

 
$
12,706

 
$
33,878

Income before income taxes
 
$
71,579

 
$
65,777

 
$
62,354

Effective tax rate
 
20.1
%
 
19.3
%
 
54.3
%

(1)
On December 22, 2017, the Tax Act was enacted, reducing the U.S. federal corporate income tax rate from 35.0% to 21.0%. The Company recognized the effect of the tax law changes in the period of enactment, which resulted in a reduction to net deferred tax assets and a corresponding charge to income tax expense of $14.3 million.
Temporary differences between the financial statements carrying amounts and the tax bases of assets and liabilities gave rise to the following deferred tax assets and liabilities as of the dates indicated:
 
 
December 31,
 
 
2019
 
2018
(In thousands)
 
Asset
 
Liability
 
Asset
 
Liability
Net operating loss and tax credit carryforward
 
$
10,421

 
$

 
$
11,250

 
$

Allowance for loan losses
 
5,416

 

 
5,318

 

Pension and other benefits
 
4,492

 

 
3,881

 

Net unrealized losses on derivative instruments
 
1,656

 

 
1,215

 

Deferred compensation and benefits
 
919

 

 
927

 

Depreciation
 

 
(3,053
)
 

 
(2,913
)
Deferred loan origination fees
 

 
(2,119
)
 

 
(1,860
)
Net unrealized (gains) losses on AFS debt securities
 


 
(890
)
 
4,882

 

Other
 


 
(19
)
 
353

 

Gross deferred tax assets (liabilities)
 
$
22,904

 
$
(6,081
)
 
$
27,826

 
$
(4,773
)
Valuation allowance on deferred tax assets
 
 
 

 
 
 

Net deferred tax assets
 
 
 
$
16,823

 
 
 
$
23,053



At December 31, 2019 and 2018, the Company had $48.2 million and $52.1 million, respectively, in unused federal net operating losses that were acquired in 2015. Due to Internal Revenue Code Section 382(g) limitations, the Company's use of the federal net operating losses acquired is limited to $3.9 million annually, which was determined using the applicable federal rate and the fair value of consideration paid for the acquisition at the acquisition date. The acquired federal net operating losses will expire between 2030 and 2034. The Company expects that it will be able to fully utilize the acquired allowable federal net operating losses prior to expiration, as the Company has a history of generating taxable income well in excess of the limitation.

The Company continuously monitors and assesses the need for a valuation allowance on its deferred tax assets and, at December 31, 2019 and 2018 determined that no valuation allowance was necessary.

As of December 31, 2019, the Company's federal and state income tax returns for the year ended December 31, 2018, 2017 and 2016 were open to audit by federal and state authorities.