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INCOME TAXES
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES

The current income tax provision reflects the tax consequences of revenue and expenses currently taxable or deductible on various income tax returns for the year reported. The deferred income tax provision generally reflects the net change in deferred income tax assets and liabilities during the year, excluding any deferred income tax assets and liabilities of acquired businesses. The components of the provision for income taxes for the years ended December 31, 2023, 2022, and 2021 were as follows, in thousands:
 202320222021
Current:   
Federal$18,844 $45,911 $32,440 
State7,209 13,549 11,352 
Total current expense$26,053 $59,460 $43,792 
Deferred: 
Federal$(7,442)$(3,637)$8,938 
State(1,754)(250)2,605 
Total deferred expense (benefit)(9,196)(3,887)11,543 
Total income tax expense$16,857 $55,573 $55,335 
Temporary differences between the amounts reported in the financial statements and the tax basis of assets and liabilities result in deferred taxes. Deferred tax assets and liabilities at December 31, 2023 and 2022, were as follows, in thousands:
 20232022
Deferred tax assets:  
Net unrealized loss on securities carried at fair value reflected in stockholders' equity$107,669 $159,763 
Net unrealized loss on derivatives reflected in stockholders’ equity(382)210 
Net unrealized loss on securities transferred from carried at fair value to held to maturity reflected in stockholders' equity 42,541 45,174 
Allowance for credit losses34,527 28,732 
Deferred compensation13,055 12,861 
Net operating loss carryforwards14,789 21,844 
Lease liability7,241 7,731 
Investments in partnerships 2,042 2,843 
Other7,971 5,476 
Total deferred tax assets229,453 284,634 
Valuation allowance for deferred tax assets (13,000)(19,001)
Total deferred tax assets after valuation allowance $216,453 $265,633 
Deferred tax liabilities:
Premises, furniture and equipment$8,245 $9,227 
Purchase accounting10,070 7,954 
Lease right-of-use asset6,391 7,182 
Deferred loan costs6,031 6,078 
Other912 3,846 
Total deferred tax liabilities31,649 34,287 
Net deferred tax assets$184,804 $231,346 

As a result of acquisitions, HTLF had net operating loss carryforwards for federal income tax purposes of approximately $14.0 million at December 31, 2023, and $17.2 million at December 31, 2022. The associated deferred tax asset was $2.9 million at December 31, 2023, and $3.6 million at December 31, 2022. These net carryforwards expire during the period from December 31, 2025, through December 31, 2035, and are subject to an annual limitation of approximately $3.1 million. Net operating loss carryforwards for state income tax purposes were approximately $191.9 million at December 31, 2023, and $203.4 million at December 31, 2022. The associated deferred tax asset, net of federal tax, was $9.9 million at December 31, 2023, and $16.3 million at December 31, 2022. These carryforwards have begun to expire and will continue to do so until December 31, 2031.

A valuation allowance against the deferred tax asset due to the uncertainty surrounding the utilization of these state net operating loss carryforwards was $9.4 million at December 31, 2023, and $15.5 million at December 31, 2022. During both 2023 and 2022, HTLF had book write-downs on investments that, for tax purposes, would generate capital losses upon disposal. Due to the uncertainty of HTLF's ability to utilize the potential capital losses, a valuation allowance for these potential losses totaled $1.7 million at December 31, 2023, and $1.5 million at December 31, 2022. HTLF released valuation allowances of $0 and $165,000 in 2023 and 2022, respectively, on deferred tax assets for capital losses it expects to realize on the disposal of partnership investments.

Realization of the deferred tax asset over time is dependent upon the existence of taxable income in carryback periods or the ability to generate sufficient taxable income in future periods. In determining that realization of the deferred tax asset was more likely than not, HTLF considered a number of factors, including its taxable income during carryback periods, its recent earnings history, its expectations for earnings in the future and, where applicable, the expiration dates associated with its tax carryforwards.
The actual income tax expense from continuing operations differs from the expected amounts for the years ended December 31, 2023, 2022, and 2021, (computed by applying the U.S. federal corporate tax rate of 21% for 2023, 2022, and 2021 income before income taxes) are as follows, in thousands:
 202320222021
Computed "expected" tax on net income$20,323 $56,228 $57,804 
Increase (decrease) resulting from: 
Tax-exempt interest benefit(2,624)(5,804)(5,504)
State income taxes, net of federal tax benefit4,310 10,523 11,026 
Tax credits(6,966)(6,613)(7,613)
Partnership investments1,105 (351)572 
Valuation allowance214 13 (440)
Excess tax expense/(benefit) on stock compensation107 (113)(270)
Other388 1,690 (240)
Income taxes$16,857 $55,573 $55,335 
Effective tax rates17.4 %20.8 %20.1 %

HTLF's income taxes included solar energy tax credits totaling $4.2 million, $4.2 million, and $6.1 million during 2023, 2022 and 2021, respectively. Federal historic rehabilitation tax credits included in HTLF's income taxes totaled $1.1 million, $1.0 million, and $720,000 in 2023, 2022, and 2021, respectively. Additionally, investments in certain low-income housing partnerships totaled $9.3 million at December 31, 2023, $10.4 million at December 31, 2022, and $5.1 million at December 31, 2021. These investments generated federal low-income housing tax credits of $1.2 million during 2023, $1.1 million at December 31, 2022, and $538,000 at December 31, 2021. These investments are expected to generate federal low-income housing tax credits of approximately $1.0 million for 2024, $790,000 for 2025, $740,000 for 2026 and $705,000 for 2027. Additionally, HTLF had new markets tax credits of $360,000 and $300,000 in 2023 and 2022, respectively.

On December 31, 2023, the amount of unrecognized tax benefits was $709,000, including $129,000 of accrued interest and penalties. On December 31, 2022, the amount of unrecognized tax benefits was $719,000, including $91,000 of accrued interest and penalties. If recognized, the entire amount of the unrecognized tax benefits would affect the effective tax rate.

The tax years ended December 31, 2020, and later remain subject to examination by the Internal Revenue Service. For state purposes, the tax years ended December 31, 2018, and later remain open for examination. HTLF does not anticipate any significant increase or decrease in unrecognized tax benefits during the next twelve months.