INCOME TAXES

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

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

(In thousands)	2022		2021		2020
Current income taxes:
Federal	$	48,920	$	48,445	$	43,115
State	16,630		15,850		13,785
Total current	65,550		64,295		56,900
Deferred income taxes:
Federal	(7,214)		9,634		(22,793)
State	(2,277)		2,623		(6,636)
Total deferred	(9,491)		12,257		(29,429)
Total income tax expense	$	56,059	$	76,552	$	27,471

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, 2018     are open to examination. The examination by the District of Columbia for the tax years 2017-2019 was finalized in 2021 with no adjustments.

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)	2022		2021
Deferred tax assets:
Allowance for credit losses	$	34,703	$	27,980
Lease liability	14,692		17,280
Employee benefits	8,247		7,740
Unrealized losses on pension plan	2,735		2,827
Deferred loan fees and costs	3,003		3,879
Equity based compensation	2,327		1,636
Unrealized losses on investments available-for-sale	42,362		121
Losses on other real estate owned	27		21
Other than temporary impairment	—		76
Loan and deposit premium/discount	205		553
Reserve for recourse loans and unfunded commitments	2,169		223
Net operating loss carryforward	2,985		2,023
Other	240		207
Gross deferred tax assets	113,695		64,566
Valuation allowance	(3,124)		(2,137)
Net deferred tax asset	110,571		62,429
Deferred tax liabilities:
Right of use asset	(12,511)		(14,888)
Pension plan costs	(1,906)		(2,092)
Depreciation	(4,203)		(2,552)
Intangible assets	(2,709)		(5,653)
Bond accretion	(289)		(78)
Fair value acquisition adjustments	(660)		(624)
Other	(738)		(626)
Gross deferred tax liabilities	(23,016)		(26,513)
Net deferred tax asset	$	87,555	$	35,916

The Company has approximately $45.8 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 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)	2022				2021				2020
	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	$	46,696	21.0	%	$	65,448	21.0	%	$	26,130	21.0	%
Increase/ (decrease) resulting from:
Tax exempt income, net	(1,909)		(0.9)		(2,271)		(0.7)		(2,472)		(2.0)
Bank-owned life insurance	(662)		(0.3)		(602)		(0.2)		(567)		(0.5)
State income taxes, net of federal income tax benefits	11,339		5.1		14,593		4.7		5,648		4.5
Federal tax law change	—		—		—		—		(1,764)		(1.4)
Other, net	595		0.3		(616)		(0.2)		496		0.5
Total income tax expense and rate	$	56,059	25.2	%	$	76,552	24.6	%	$	27,471	22.1	%

Under the CARES Act, which was enacted on March 27, 2020, 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 2020, 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 for 2020 due to the federal statutory rates for the 2013, 2014 and 2015 tax years being higher than the 2018 tax year.

On August 16, 2022, the Inflation Reduction Act ("the IRA") was signed into law. The IRA includes climate and energy provisions, introduces a 15% corporate alternative minimum tax ("CAMT") on corporations whose average annual adjusted financial statement income exceeds $1 billion, and a 1% excise tax on stock repurchases made by publicly traded US corporations. The provisions above generally are effective for tax years beginning after December 31, 2022. These provisions did not have a material impact on the Company's income taxes for 2022.