Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Schedule of deferred tax assets and liabilities

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 Corporation’s deferred tax assets and liabilities are as follows:


December 31 (In thousands)	2019		2018
Deferred tax assets:
Allowance for loan losses	$	12,120	$	10,818
Accumulated other comprehensive loss – Pension Plan	7,091		7,888
Accumulated other comprehensive loss – Unrealized losses on securities	—		5,347
Accumulated other comprehensive loss – Unrealized losses on swaps	121		—
Deferred compensation	3,131		2,896
OREO valuation adjustments	964		1,028
Net deferred loan fees	1,451		1,221
Deferred contract bonus	477		556
Nonvested equity-based compensation	2,132		1,567
Fixed assets	—		206
Net operating loss ("NOL") carryforward	4,094		4,663
Operating lease liability	3,097		—
Other	843		824
Total deferred tax assets	$	35,521	$	37,014
Deferred tax liabilities:
Accumulated other comprehensive loss - Unrealized gains on securities	$	4,662	$	—
Fixed assets	585		—
Deferred investment income	6,231		6,120
Pension Plan	19,238		19,133
MSRs	2,153		2,137
Partnership adjustments	178		630
Purchase accounting adjustments	49		769
Operating lease right-of-use asset	2,932		—
Lessor adjustments	2,697		—
Other	488		210
Total deferred tax liabilities	$	39,213	$	28,999
Net deferred tax asset (liability)	$	(3,692)	$	8,015

Federal and state income taxes

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


December 31, (In thousands)	2019		2018		2017
Currently payable
Federal	$	14,797	$	12,700	$	20,660
State	1,191		352		—
Amortization of qualified affordable housing projects	6,927		7,322		10,278

Deferred
Federal	(815)		481		3,289
State	(29)		57		—

Total	$	22,071	$	20,912	$	34,227

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 years ended December 31, 2019 and 2018, and 35% for the year ended December 31, 2017.


	2019		2018		2017
Statutory federal corporate income tax rate	21.0	%	21.0	%	35.0	%
Changes in rates resulting from:
Tax exempt interest income, net of disallowed interest	(2.0)	%	(1.8)	%	(2.8)	%
Bank owned life insurance	(0.8)	%	(1.1)	%	(1.4)	%
Investments in qualified affordable housing projects, net of tax benefits	(1.5)	%	(1.3)	%	(1.9)	%
KSOP dividend deduction	(0.6)	%	(0.6)	%	(1.0)	%
Impact of the Tax Cuts and Jobs Act ⁽¹⁾	—	%	—	%	1.0	%
Non-taxable gain on NewDominion common stock	—	%	(0.6)	%	—	%
Other	1.6	%	0.3	%	—	%
Effective tax rate	17.7	%	15.9	%	28.9	%

⁽¹⁾ As a result of the reduction of the federal corporate income tax rate to 21%, U.S. GAAP required companies to re-value certain tax-related assets and liabilities as of the date of enactment, with the resulting tax effects accounted for in the reporting period of enactment. This re-valuation resulted in a $1.9 million tax benefit as a result of the revaluation of Park’s net deferred tax liabilities and $3.1 million in tax expense as a result of accelerated amortization of qualified affordable housing tax credit investments. The net effect of the Tax Cuts and Jobs Act was an increase to federal income tax expense at Park of $1.2 million.

Reconciliation of unrecognized tax benefits

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


(In thousands)	2019		2018		2017
January 1 Balance	$	1,226	$	664	$	633
Additions based on tax positions related to the current year	12		10		117
Additions for tax positions of prior years	2		781		—
Reductions for tax positions of prior years	(3)		—		(9)
Reductions due to statute of limitations	(283)		(229)		(77)
December 31 Balance	$	954	$	1,226	$	664