Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Schedule of deferred tax assets and liabilities

Significant components of the Corporation’s deferred tax assets and liabilities are as follows:



December 31 (In thousands)	2018		2017
Deferred tax assets:
Allowance for loan losses	$	10,818	$	10,498
Accumulated other comprehensive loss – Pension plan	7,888		7,098
Accumulated other comprehensive loss – Unrealized losses on securities	5,347		946
Deferred compensation	2,896		2,744
OREO valuation adjustments	1,028		1,327
Net deferred loan fees	1,221		1,115
Deferred contract bonus	556		645
Nonvested equity-based compensation	1,567		1,069
Fixed assets	206		877
Net operating loss ("NOL") carryforward	4,663		—
Other	824		1,230
Total deferred tax assets	$	37,014	$	27,549
Deferred tax liabilities:
Deferred investment income	6,120		6,120
Pension Plan	19,133		19,076
MSRs	2,137		2,034
Partnership adjustments	630		460
Purchase accounting adjustments	769		166
Other	210		198
Total deferred tax liabilities	$	28,999	$	28,054
Net deferred tax asset (liability)	$	8,015	$	(505	)

Federal and state income taxes

The components of the provision for federal income taxes are shown below:



December 31, (In thousands)	2018		2017		2016
Currently payable
Federal	$	12,700	$	20,660	$	28,879
State	352		—		—
Amortization of qualified affordable housing projects	7,322		10,278		7,300

Deferred
Federal	481		3,289		581
State	57		—		—

Total	$	20,912	$	34,227	$	36,760

Schedule of income tax rate reconciliation

The following is a reconciliation of income tax expense to the amount computed at the statutory federal corporate income tax rate of 21% for the year ended December 31, 2018, and 35% for the years ended December 31, 2017 and 2016.



	2018		2017		2016
Statutory federal corporate income tax rate	21.0	%	35.0	%	35.0	%
Changes in rates resulting from:
Tax exempt interest income, net of disallowed interest	(1.8	)%	(2.8	)%	(1.3	)%
Bank owned life insurance	(1.1	)%	(1.4	)%	(1.2	)%
Investments in qualified affordable housing projects, net of tax benefits	(1.3	)%	(1.9	)%	(1.7	)%
KSOP dividend deduction	(0.6	)%	(1.0	)%	(1.0	)%
Impact of the Tax Cuts and Jobs Act ⁽¹⁾	—	%	1.0	%	—	%
Non-taxable gain on NewDominion common stock	(0.6	)%	—	%	—	%
State income tax, net of federal tax benefits	0.2	%	—	%	—	%
Other	0.1	%	—	%	0.1	%
Effective tax rate	15.9	%	28.9	%	29.9	%

Reconciliation of unrecognized tax benefits

The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits.



(In thousands)	2018			2017			2016
January 1 Balance	$	664		$	633		$	558
Additions based on tax positions related to the current year	10			117			117
Additions for tax positions of prior years	781			—			38
Reductions for tax positions of prior years	—			(9		)	—
Reductions due to statute of limitations	(229		)	(77		)	(80		)
December 31 Balance	$	1,226		$	664		$	633