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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes
Note 10.  Income Taxes

Income tax expense attributable to continuing operations for each of the years ended December 31 is as follows (in thousands):
 202120202019
Current tax expense :   
Federal$125,016 $98,082 $77,422 
State11,798 19,270 4,538 
Total current tax expense136,814 117,352 81,960 
Deferred tax expense:  
Federal(12,149)(45,450)12,446 
State(83)(12,865)2,250 
Total deferred tax (benefit) expense(12,232)(58,315)14,696 
Total income tax expense$124,582 $59,037 $96,656 
Pinnacle Financial's income tax expense differs from the amounts computed by applying the Federal income tax statutory rate of 21% to income before income taxes. A reconciliation of the differences for each of the years in the three-year period ended December 31, 2021 is as follows (in thousands):
 202120202019
Income tax expense at statutory rate$136,900 $77,985 $104,483 
State excise tax expense, net of federal tax effect9,255 5,059 5,363 
Tax-exempt securities(15,243)(13,706)(11,078)
Federal tax credits(4,712)(3,717)(1,704)
Bank owned life insurance(4,413)(4,759)(3,646)
Insurance premiums(273)(272)(238)
Excess tax benefits associated with equity compensation(2,475)(417)(1,011)
Other items5,543 (1,136)4,487 
Income tax expense$124,582 $59,037 $96,656 

Pinnacle Financial's effective tax rate differs from the Federal income tax rates primarily due to state excise tax expense, investments in bank-qualified tax-exempt municipal securities, tax benefits from Pinnacle Bank's real estate investment trust and municipal investment subsidiaries, and tax benefits associated with share-based compensation, bank owned life insurance, and Pinnacle Financial's captive insurance subsidiary, offset in part by the limitation on deductibility of meals and entertainment expense, non-deductible FDIC insurance premiums and non-deductible executive compensation.

The components of deferred income taxes included in other assets in the accompanying consolidated balance sheets at December 31, 2021 and 2020 are as follows (in thousands):
 20212020
Deferred tax assets:  
Allowance for credit losses$66,785 $72,316 
Loans14,778 14,694 
Insurance759 690 
Accrued liability for supplemental retirement agreements7,612 7,457 
Restricted stock and stock options9,148 9,181 
Equity method investment— 171 
Lease liability26,476 23,894 
Other real estate owned1,540 2,287 
Net federal operating loss carryforward and credits1,271 1,796 
Annual incentive compensation23,095 8,712 
Partnership interests27,653 25,225 
Allowance for off balance sheet credit exposures5,873 6,069 
Other deferred tax assets1,941 2,559 
Total deferred tax assets186,931 175,051 
Deferred tax liabilities:  
Depreciation and amortization14,520 14,418 
Core deposit and other intangible assets8,787 11,077 
Securities21,680 34,373 
Cash flow hedge9,890 19,627 
REIT dividends1,222 1,366 
FHLB related liabilities1,600 1,798 
Equity method investment23 — 
Right-of-use assets and other leasing transactions24,315 22,232 
Subordinated debt1,791 1,920 
Other deferred tax liabilities1,831 1,630 
Total deferred tax liabilities85,659 108,441 
Net deferred tax assets$101,272 $66,610 
 
At December 31, 2021, the Company had federal and state loss carryforwards resulting from acquisitions of approximately $5.7 million that expire at various dates from 2028 to 2034.

ASC 740, Income Taxes, defines the threshold for recognizing the benefits of tax return positions in the financial statements as "more-likely-than-not" to be sustained by the taxing authority. This section also provides guidance on the derecognition, measurement and classification of income tax uncertainties, along with any related interest and penalties, and includes guidance concerning accounting for income tax uncertainties in interim periods.

A reconciliation of the beginning and ending unrecognized tax benefit related to state uncertain tax positions is as follows (in thousands):
 202120202019
Balance at January 1,$9,658 $6,910 $5,083 
Increases due to tax positions taken during the current year3,647 2,748 1,827 
Increases due to tax positions taken during a prior year— — — 
Decreases due to the lapse of the statute of limitations during the current year(568)— — 
Decreases due to settlements with the taxing authorities during the current year— — — 
Balance at December 31,$12,737 $9,658 $6,910 

Pinnacle Financial's policy is to recognize interest and/or penalties related to income tax matters in income tax expense. No interest and penalties were recorded for the year ended December 31, 2021. Pinnacle Financial recognized $571,000 in interest and penalties for the year ended December 31, 2020. No interest and penalties were recorded for the year ended December 31, 2019.