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Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes

Income Taxes

Note 12—Income Taxes

The provision for income taxes consists of the following:

​

​	​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31,
(Dollars in thousands)	​	2021		​	2020		​	2019
Current:		​			​			​		​
Federal	​	$	43,959	​	$	16,245	​	$	40,375	​
State	​		16,512	​		13,296	​		4,965	​
Total current tax expense	​		60,471	​		29,541	​		45,340	​
Deferred:	​	​	​	​	​	​	​	​	​	​
Federal	​		61,521	​		(36,801)	​		(1,598)	​
State	​		6,744	​		(9,400)	​		200	​
Total deferred tax expense (benefit)	​		68,265	​		(46,201)	​		(1,398)	​
Provision (benefit) for income taxes	​	$	128,736	​	$	(16,660)	​	$	43,942	​

​

The provision for income taxes differs from that computed by applying the federal statutory income tax rate of 21% in 2021, 2020 and 2019 to income before provision for income taxes, as indicated in the following analysis:

​

​	​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31,
(Dollars in thousands)	​	2021		​	2020		​	2019
Income taxes at federal statutory rate		$	126,899		$	21,834		$	48,389	​
Increase (reduction) of taxes resulting from:	​	​	​	​	​	​	​	​	​	​
State income taxes, net of federal tax benefit	​		18,372	​		3,077	​		4,080	​
Non-deductible merger expenses	​	​	—	​	​	1,344	​	​	—	​
Increase in cash surrender value of BOLI policies	​	​	(3,866)	​	​	(2,389)	​	​	(1,210)	​
Tax-exempt interest	​		(5,450)	​		(2,257)	​		(1,877)	​
Income tax credits	​		(11,759)	​		(7,138)	​		(6,881)	​
Non-deductible FDIC premiums	​	​	2,380	​	​	1,364	​	​	133	​
Non-deductible executive compensation	​	​	530	​	​	1,016	​	​	315	​
Benefit of tax loss carryback under CARES Act	​	​	—	​	​	(31,468)	​	​	—	​
Other, net	​		1,630	​		(2,043)	​		993	​
​	​	$	128,736	​	$	(16,660)	​	$	43,942	​

​

The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets and liabilities are reflected at income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

​

Under the CARES Act, tax law changed to include the ability to carry back net operating losses ("NOLs") generated in 2018 through 2020 for five years, which was previously disallowed. Due to differences in tax and GAAP accounting rules, which relates to a tax method change to fair value for loans, the Company filed a short period tax return as of the merger date, which generated a NOL. This loss was carried back to the 2015 through 2017 tax years at a 35% tax rate, generating an income tax benefit of $31.5 million during 2020.

​

The components of the net deferred tax asset are as follows:

​

​	​	​	​	​	​	​	​
​	​	December 31,
(Dollars in thousands)	​	2021		​	2020
Allowance for credit losses		$	81,767		$	119,602	​
Other-than-temporary impairment on SBIC investments	​		—	​		268	​
Share-based compensation	​		6,290	​		2,807	​
Pension plan and post-retirement benefits	​		752	​		516	​
Deferred compensation	​		14,437	​		13,671	​
Purchase accounting adjustments	​		—	​		11,772	​
Other real estate owned	​		1,577	​		899	​
Net operating loss and tax credit carryforwards	​		20,659	​		26,229	​
Deferred loan fees and costs	​	​	—	​	​	12,826	​
Nonaccrual Interest	​	​	88	​	​	3,141	​
Lease liability	​	​	28,514	​	​	28,179	​
Mark to market assets	​		11,788	​		—	​
Unrealized losses on investment securities available for sale	​	​	6,691	​	​	—	​
Other	​		719	​		603	​
Total deferred tax assets	​		173,282	​		220,513	​
Unrealized gains on investment securities available for sale	​		—	​		13,026	​
Depreciation	​		21,028	​		18,326	​
Intangible assets	​		27,732	​		34,648	​
Net deferred loan costs	​		3,579	​		—	​
Right of use assets	​	​	27,136	​	​	27,012	​
Prepaid expense	​		725	​		1,950	​
Tax deductible goodwill	​		5,994	​		1,302	​
Mortgage servicing rights	​	​	16,100	​	​	6,134	​
Purchase accounting adjustments	​	​	890	​	​	—	​
Other	​		302	​		1,534	​
Total deferred tax liabilities	​		103,486	​		103,932	​
Net deferred tax assets before valuation allowance	​		69,796	​		116,581	​
Less, valuation allowance	​		(4,832)	​		(5,635)	​
Net deferred tax assets	​	$	64,964	​	$	110,946	​

​

The Company had federal net operating loss (“NOL”) and realized built-in loss carryforwards of $61.8 million and $91.9 million for the years ended December 31, 2021 and 2020, respectively, which expire in varying amounts between 2026 to 2036. All of the Company's loss carryforwards are subject to Section 382 of the Internal Revenue Code, which places an annual limitation on the amount of federal net operating loss carryforwards which the Company may utilize after a change in control, and also limits the Company's ability to utilize certain tax deductions (realized built-in losses or RBIL) due to the existence of a Net Unrealized Built-in Loss (NUBIL) at the time of the change in control. The Company acquired federal net operating loss carryforwards of $62.9 million in the 2020 merger with CSFL. These acquired NOLs are subject to a combined annual Section 382 limitation of $16.0 million. In total, the allowable deduction for all loss carryforwards on an annual basis is $20.7 million. The Company is allowed to carry forward any such limited RBIL under terms similar to those related to NOLs.

The Company also has acquired state net operating losses in Georgia, Florida and Alabama. These are also subject to annual limitations under Section 382, similar to the federal NOLs. The Company expects all Section 382 limited carryforwards to be realized within the applicable carryforward period.

The Company has state net operating loss carryforwards of $169.4 million and $222.9 million for the years ended December 31, 2021 and 2020, respectively, most of which expire in varying amounts through 2039. There is a valuation allowance of $4.8 million on $122.5 million of state operating loss carryforwards at the parent company for which realizability is uncertain.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more

likely than not that the Company will realize the benefits of these deferred tax assets, net of the valuation allowance at December 31, 2021.

​

As of December 31, 2021, the Company had no material unrecognized tax benefits or accrued interest and penalties. It is the Company's policy to account for interest and penalties accrued relative to unrecognized tax benefits as a component of income tax expense.

​

Generally, the Company’s federal and state income tax returns are no longer subject to examination by taxing authorities for years prior to 2018.

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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.

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