Income Taxes (Tables)

12 Months Ended

Dec. 31, 2020

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)	2020		2019
Deferred tax assets:
Allowance for loan losses	$	19,512	$	12,120
Accumulated other comprehensive loss – Pension Plan	9,150		7,091
Accumulated other comprehensive loss – Unrealized losses on swaps	186		121
Deferred compensation	3,887		3,131
OREO valuation adjustments	1,012		964
Net deferred loan fees	3,283		1,451
Deferred contract bonus	571		477
Nonvested equity-based compensation	2,567		2,132
Net operating loss ("NOL") carryforward	3,629		4,094
Operating lease liability	3,561		3,097
Other	1,424		843
Total deferred tax assets	$	48,782	$	35,521
Deferred tax liabilities:
Accumulated other comprehensive loss - Unrealized gains on securities	$	10,507	$	4,662
Fixed assets	3,360		585
Deferred investment income	6,637		6,231
Pension Plan	20,407		19,238
MSRs	2,781		2,153
Partnership adjustments	204		178
Purchase accounting adjustments	604		49
Operating lease right-of-use asset	3,343		2,932
Lessor adjustments	3,433		2,697
Other	398		488
Total deferred tax liabilities	$	51,674	$	39,213
Net deferred tax liability	$	(2,892)	$	(3,692)

Federal and state income taxes

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


December 31, (In thousands)	2020		2019		2018
Currently payable
Federal	$	22,769	$	14,797	$	12,700
State	1,432		1,191		352
Amortization of qualified affordable housing projects	7,046		6,927		7,322

Deferred
Federal	(4,812)		(815)		481
State	287		(29)		57

Total	$	26,722	$	22,071	$	20,912

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, 2020, 2019 and 2018.


	2020		2019		2018
Statutory federal corporate income tax rate	21.0	%	21.0	%	21.0	%
Changes in rates resulting from:
Tax exempt interest income, net of disallowed interest	(1.5)	%	(2.0)	%	(1.8)	%
Bank owned life insurance	(0.7)	%	(0.8)	%	(1.1)	%
Investments in qualified affordable housing projects, net of tax benefits	(1.1)	%	(1.5)	%	(1.3)	%
KSOP dividend deduction	(0.6)	%	(0.6)	%	(0.6)	%
Non-taxable gain on NewDominion common stock	—	%	—	%	(0.6)	%
Other	0.2	%	1.6	%	0.3	%
Effective Tax Rate	17.3	%	17.7	%	15.9	%

Reconciliation of unrecognized tax benefits

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


(In thousands)	2020		2019		2018
January 1 Balance	$	954	$	1,226	$	664
Additions based on tax positions related to the current year	12		12		10
Additions for tax positions of prior years	—		2		781
Reductions for tax positions of prior years	—		(3)		—
Reductions due to statute of limitations	(333)		(283)		(229)
December 31 Balance	$	633	$	954	$	1,226