Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

(12) INCOME TAXES

The components of the Company’s income tax expense (benefit) are as follows:

	Year Ended December 31,
	2020			2019		2018
	(Dollars in thousands)
Current taxes:
Federal	$	25,974		$	26,247	$	23,700
State		7,443			7,288		7,083
Deferred taxes		(9,491	)		1,148		3,155
Total income taxes	$	23,926		$	34,683	$	33,938

Income tax (benefit) expense applicable to securities transactions approximated $(82,000), $171,000 and $10,000 for the years ended December 31, 2020, 2019 and 2018, respectively.

A reconciliation of tax expense at the federal statutory tax rate applied to income before taxes is presented in the following table.  The federal statutory tax rate was 21% in 2020, 2019 and 2018:

	Year Ended December 31,
	2020			2019			2018
	(Dollars in thousands)
Tax expense at the federal statutory tax rate	$	25,937		$	35,377		$	33,546
Increase (decrease) in tax expense from:
Tax-exempt income, net		(507	)		(581	)		(510	)
Modified endowment life contracts		(508	)		(519	)		(558	)
Share based compensation excess tax benefit		(412	)		(765	)		(917	)
Tax deductible dividends paid on ESOP		(453	)		—			—
State tax expense, net of federal tax benefit		5,606			5,757			5,595
Utilization of tax credits:
New markets tax credits, net of tax expense		(3,121	)		(3,547	)		(1,422	)
Low-income housing tax credits, net of amortization		(1,273	)		(1,266	)		(1,273	)
Other tax credits		(320	)		—			—
Other, net		(1,023	)		227			(523	)
Total tax expense	$	23,926		$	34,683		$	33,938

The net deferred tax asset consisted of the following and is reported in other assets:

	December 31,
	2020			2019
	(Dollars in thousands)
Provision for credit losses	$	22,500		$	13,763
Write-downs of other real estate owned		143			181
Deferred compensation		2,325			2,268
Stock-based compensation		1,672			1,514
Investments in partnership interests		4,695			3,677
Other		405			903
Gross deferred tax assets		31,740			22,306
Unrealized net gains on securities		(2,513	)		(1,187	)
Premium on securities of banks acquired		(144	)		(153	)
Intangibles		(6,135	)		(6,757	)
Basis difference related to tax credits		(2,127	)		(2,015	)
Depreciation		(11,529	)		(10,349	)
Prepaid expense deducted		(1,208	)		(1,000	)
Other		(178	)		(180	)
Gross deferred tax liabilities		(23,834	)		(21,641	)
Net deferred tax asset	$	7,906		$	665

The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if applicable, in income tax expense. During the years ended December 31, 2020, 2019 and 2018, the Company did not recognize or accrue any interest and penalties related to unrecognized tax benefits. Federal and various state income tax statutes dictate that tax returns filed in any of the previous three reporting periods remain open to examination, which includes tax return years 2017 to 2019. In addition, the 2018 return will remain open through 2023 due to amending it in 2020. The Company has no open examinations with either the Internal Revenue Service or any state agency.

Management performs an analysis of the Company’s tax position annually and believes it is more likely than not that all of its tax positions will be utilized in future years.