INCOME TAXES

12 Months Ended

Dec. 31, 2020

The following table provides the components of income tax expense for the years ended December 31:


(In thousands)	2020		2019		2018
Current income taxes:
Federal	$	43,115	$	28,404	$	18,615
State	13,785		6,598		7,183
Total current	56,900		35,002		25,798
Deferred income taxes:
Federal	(22,793)		234		4,808
State	(6,636)		1,192		1,218
Total deferred	(29,429)		1,426		6,026
Total income tax expense	$	27,471	$	36,428	$	31,824

The Company does not have uncertain tax positions that are deemed material, and did not recognize any adjustments for unrecognized tax benefits.

The Company is subject to U.S. federal income tax and income tax in various state jurisdictions. All tax years ending after December 31, 2016 are open to examination. The District of Columbia is currently conducting a routine tax exam for the tax years 2017-2019. No findings have been issued at this time and the Company does not expect any material adjustments from this exam.

Temporary differences between the amounts reported in the financial statements and the tax bases of assets and liabilities result in deferred taxes. Deferred tax assets and liabilities, shown as the sum of the appropriate tax effect for each significant type of temporary difference, are presented in the following table at December 31 for the years indicated:


(In thousands)	2020		2019
Deferred tax assets:
Allowance for credit losses	$	42,231	$	14,287
Lease liability	19,192		19,616
Fair value acquisition adjustments	—		1,322
Employee benefits	6,108		4,535
Unrealized losses on pension plan	3,249		2,845
Deferred loan fees and costs	4,486		471
Equity based compensation	1,856		659

Losses on other real estate owned	203		201
Other than temporary impairment	75		76
Loan and deposit premium/discount	1,081		1,422

Reserve for recourse loans	546		166
Net operating loss carryforward	1,475		916

Other	181		159
Gross deferred tax assets	80,683		46,675
Valuation allowance	(1,479)		(880)
Net deferred tax asset	79,204		45,795

Deferred tax liabilities:
Right of use asset	(16,693)		(17,688)
Unrealized gains on investments available-for-sale	(9,684)		(1,379)
Pension plan costs	(2,211)		(2,373)
Depreciation	(2,950)		(2,744)
Intangible assets	(6,894)		(3,338)
Bond accretion	(195)		(322)
Section 481 adjustments	(669)		(1,335)
Fair value acquisition adjustments	(555)		—
Other	(567)		(585)
Gross deferred tax liabilities	(40,418)		(29,764)
Net deferred tax asset	$	38,786	$	16,031

The Company has approximately $23.0 million of state net operating loss carryover which begins to expire in 2032. The Company believes that it is more likely than not that the future benefit from the state net operating loss carryover on $19.9 million will not be realized. As such, there is a valuation allowance on the deferred tax assets of the jurisdictions in which those net operating losses relate.

The reconcilements between the statutory federal income tax rate and the effective rate for the years ended December 31 are presented in the following table:


(Dollars in thousands)	2020				2019				2018
	Amount		Percentage of Pre-Tax Income		Amount		Percentage of Pre-Tax Income		Amount		Percentage of Pre-Tax Income
Income tax expense at federal statutory rate	$	26,130	21.0	%	$	32,101	21.0	%	$	27,865	21.0	%
Increase/ (decrease) resulting from:
Tax exempt income, net	(2,472)		(2.0)		(2,101)		(1.4)		(2,427)		(1.8)
Bank-owned life insurance	(567)		(0.5)		(665)		(0.4)		(909)		(0.7)
State income taxes, net of federal income tax benefits	5,648		4.5		6,154		4.0		6,637		5.0
Federal tax law change	(1,764)		(1.4)		—		—		—		—
Other, net	496		0.5		939		0.6		658		0.5
Total income tax expense and rate	$	27,471	22.1	%	$	36,428	23.8	%	$	31,824	24.0	%

Under the CARES Act, net operating losses arising in tax years beginning after December 31, 2017, and before January 1, 2021 can be carried back five tax years preceding the tax year in which the loss originated. During the current year, the Company utilized net operating losses acquired as a part of the 2018 WashingtonFirst acquisition. Following the passage of the CARES Act, the Company carried back WashingtonFirst's 2018 net operating loss to tax years 2013 through 2015. As a result, the Company recorded a tax benefit of $1.8 million due to the federal statutory rates for the 2013, 2014 and 2015 tax years being higher than the 2018 tax year.