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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The aggregate amount of income taxes included in the Consolidated Statements of Income and the Consolidated Statements of Equity for the years ended December 31, were as follows:
(Dollars in thousands) |  | 2017 |  | 2016 |  | 2015
Consolidated Statements of Income: |  |  |  |  |  |
Income tax expense/(benefit) |  | $ | 131,892 |  |  | $ | 106,810 |  |  | $ | 10,941 |
Consolidated Statements of Equity: |  |  |  |  |  |  |  |  |
Income tax expense/(benefit) related to: |  |  |  |  |  |  |  |  |
Net unrealized gains/(losses) on pension and other postretirement plans |  | (832 | ) |  | (7,172 | ) |  | (6,689 | )
Net unrealized gains/(losses) on securities available-for-sale |  | (2,955 | ) |  | (12,810 | ) |  | (9,445 | )
Net unrealized gains/(losses) on cash flow hedges |  | (3,163 | ) |  | (780 | ) |  | — |
Share based compensation |  | — |  |  | (1,613 | ) |  | (356 | )
Total |  | $ | 124,942 |  |  | $ | 84,435 |  |  | $ | (5,549 | )
The components of income tax expense/(benefit) for the years ended December 31, were as follows:
(Dollars in thousands) |  | 2017 |  | 2016 |  | 2015
Current: |  |  |  |  |  |
Federal |  | $ | 10,012 |  |  | $ | 25,234 |  |  | $ | (5,059 | )
State |  | 879 |  |  | 1,803 |  |  | (8,258 | )
Foreign |  | — |  |  | 169 |  |  | 62 |
Deferred: |  |  |  |  |  |  |  |
Federal |  | 114,059 |  |  | 67,109 |  |  | 19,487 |
State |  | 6,942 |  |  | 12,495 |  |  | 4,706 |
Foreign |  | — |  |  | — |  |  | 3 |
Total |  | $ | 131,892 |  |  | $ | 106,810 |  |  | $ | 10,941 |
On December 22, 2017, the Tax Cuts and Jobs Act “Tax Act” was signed into law. The Tax Act reduces the federal statutory tax rate from 35 percent to 21 percent. Although the rate reduction was not effective until January 1, 2018, GAAP required an adjustment in 2017 of deferred tax balances to reflect the new effective tax rate. FHN recorded an $82 million increase in tax expense related to the effects of the Tax Act. This estimate will be adjusted during the measurement period related to the CBF acquisition and as deferred tax items are finalized for the 2017 tax return. A reconciliation of expected income tax expense/(benefit) at the federal statutory rate of 35 percent to the total income tax expense follows:
(Dollars in thousands) |  | 2017 |  | 2016 |  | 2015
Federal income tax rate |  | 35% |  | 35% |  | 35%
Tax computed at statutory rate |  | $ | 108,105 |  |  | $ | 120,862 |  |  | $ | 37,889 |
Increase/(decrease) resulting from: |  |  |  |  |  |  |  |  |
State income taxes |  | 4,753 |  |  | 9,918 |  |  | 7 |
Bank-owned life insurance (“BOLI”) |  | (8,401 | ) |  | (5,661 | ) |  | (4,897 | )
401(k) – employee stock ownership plan (“ESOP”) |  | (904 | ) |  | (824 | ) |  | (714 | )
Tax-exempt interest |  | (7,890 | ) |  | (7,098 | ) |  | (6,507 | )
Non-deductible expenses |  | 7,558 |  |  | 1,079 |  |  | 887 |
LIHTC credits and benefits, net of amortization |  | (5,327 | ) |  | (6,165 | ) |  | (7,239 | )
Other tax credits |  | (2,480 | ) |  | (3,886 | ) |  | (2,012 | )
Change in valuation allowance – DTA |  | (40,473 | ) |  | (116 | ) |  | (3,875 | )
Other changes in unrecognized tax benefits |  | 46 |  |  | 616 |  |  | (1,386 | )
Effect of Tax Act |  | 82,027 |  |  | — |  |  | — |
Other |  | (5,122 | ) |  | (1,915 | ) |  | (1,212 | )
Total |  | $ | 131,892 |  |  | $ | 106,810 |  |  | $ | 10,941 |
As of December 31, 2017, FHN had net deferred tax asset balances related to federal and state income tax carryforwards of $126.8 million and $19.8 million, respectively, which will expire at various dates as follows:
(Dollars in thousands) |  | Expiration Dates |  | Net Deferred Tax Asset Balance
General business credits-federal |  | 2031-2037 |  | $ | 64,835 |
Losses-federal |  | 2027-2035 |  | 62,010 |
Net operating losses-states |  | 2018-2022 |  | 1,092 |
Net operating losses-states |  | 2023-2035 |  | 18,709 |
A deferred tax asset (“DTA”) or deferred tax liability (“DTL”) is recognized for the tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The tax consequence is calculated by applying enacted statutory tax rates, applicable to future years, to these temporary differences. In order to support the recognition of the DTA, FHN’s management must believe that the realization of the DTA is more likely than not. FHN evaluates the likelihood of realization of the DTA based on both positive and negative evidence available at the time, including (as appropriate) scheduled reversals of DTLs, projected future taxable income, tax planning strategies, and recent financial performance. Realization is dependent on generating sufficient taxable income prior to the expiration of the carryforwards attributable to the DTA. In projecting future taxable income, FHN incorporates assumptions including the estimated amount of future state and federal pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates used to manage the underlying business. As of December 31, 2017, FHN's net DTA was $221.8 million compared with the $199.6 million at December 31, 2016. FHN's gross DTA (net of a valuation allowance) and gross DTL were $353.2 million and $131.4 million, respectively. FHN's net DTA increased by $137.7 million on November 30, 2017 upon the merger of CBF into FHN. The provisional estimate of the effects of the Tax Act, discussed in this Note above, includes tax expense related to a decrease in the acquired DTA from CBF by approximately $48.1 million due to the adjustment of the DTA to the lower federal tax rate. As of December 31, 2017, FHN had fully utilized all capital loss carryovers. FHN had a valuation allowance of $40.4 million against its 2012 federal capital loss carryforward as of December 31, 2016. Although realization is not assured, FHN believes that it meets the more-likely-than-not requirement with respect to the net DTA after valuation allowance. Temporary differences which gave rise to deferred tax assets and deferred tax liabilities on December 31, 2017 and 2016 were as follows:
(Dollars in thousands) |  | 2017 |  | 2016
Deferred tax assets: |  |  |  |  |  |
Loss reserves |  | $ | 91,390 |  |  | $ | 65,605 |
Employee benefits |  | 50,404 |  |  | 83,074 |
Equity investments |  | 28,547 |  |  | — |
Accrued expenses |  | 16,052 |  |  | 16,767 |
Capital loss carryforwards |  | — |  |  | 44,469 |
Credit carryforwards |  | 64,835 |  |  | 80,048 |
Federal loss carryforwards |  | 62,010 |  |  | 175 |
State loss carryforwards |  | 19,801 |  |  | 19,438 |
Investment in debt securities (ASC 320) (a) |  | 8,811 |  |  | 10,693 |
Other |  | 11,512 |  |  | 17,340 |
Gross deferred tax assets |  | 353,362 |  |  | 337,609 |
Valuation allowance |  | (147 | ) |  | (40,593 | )
Deferred tax assets after valuation allowance |  | $ | 353,215 |  |  | $ | 297,016 |
Deferred tax liabilities: |  |  |  |  |  |
Depreciation and amortization |  | 43,040 |  |  | 36,347 |
Equity investments |  | — |  |  | 12,196 |
Other intangible assets |  | 55,923 |  |  | 37,596 |
Prepaid expenses |  | 9,255 |  |  | 11,150 |
Real estate investment trust income |  | 22,576 |  |  | — |
Other |  | 602 |  |  | 114 |
Gross deferred tax liabilities |  | 131,396 |  |  | 97,403 |
Net deferred tax assets |  | $ | 221,819 |  |  | $ | 199,613 |
Certain previously reported amounts have been reclassified to agree with current presentation. (a) Tax effects of unrealized gains and losses are tracked on a security-by-security basis. The total unrecognized tax benefits (“UTB”) at December 31, 2017 and 2016, was $4.3 million and $4.2 million, respectively. To the extent such unrecognized tax benefits as of December 31, 2017 are subsequently recognized, $1.8 million of tax benefits would impact tax expense and FHN’s effective tax rate in future periods. FHN is currently in audit in several jurisdictions. It is reasonably possible that the UTB related to state exposures could decrease by $.5 million during 2018 if audits are completed and settled and if the applicable statutes of limitations expire as scheduled. FHN recognizes interest accrued and penalties related to UTB within income tax expense. FHN had approximately $.4 million and $.3 million accrued for the payment of interest as of December 31, 2017 and 2016, respectively. The total amount of interest and penalties recognized in the Consolidated Statements of Income during 2017 and 2016 was an expense of $.1 million and $.2 million, respectively. The rollforward of unrecognized tax benefits is shown below:
(Dollars in thousands) |  |
Balance at December 31, 2015 |  | $ | 3,673 |
Increases related to prior year tax positions |  | 951 |
Increases related to current year tax positions |  | 27 |
Settlements |  | (407 | )
Balance at December 31, 2016 |  | $ | 4,244 |
Increases related to prior year tax positions |  | 33 |
Increases related to current year tax positions |  | 174 |
Lapse of statutes |  | (180 | )
Balance at December 31, 2017 |  | $ | 4,271 |

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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