Income Taxes

12 Months Ended

Dec. 31, 2018

(12) INCOME TAXES

The components of the Company’s income tax expense (benefit) are as follows:

	Year Ended December 31,
	2018		2017		2016
	(Dollars in thousands)
Current taxes:
Federal	$	23,700	$	39,569	$	34,003
State		7,083		5,914		5,308
Deferred taxes		3,155		4,383		(2,048	)
Total income taxes	$	33,938	$	49,866	$	37,263

Income tax expense (benefit) applicable to securities transactions approximated $10,000, $1.4 million and $(21,000) for the years ended December 31, 2018, 2017 and 2016, respectively.

Income tax expense for 2017 was impacted by the write-down of net deferred tax asset of $4.3 million resulting from the federal tax rate change under the Tax Cuts and Jobs Act, enacted December 22, 2017. A reconciliation of tax expense at the federal statutory tax rate applied to income before taxes is presented in the following table. The federal statutory tax rate was 21% in 2018 and 35% in 2017 and 2016:

	Year Ended December 31,
	2018			2017			2016
	(Dollars in thousands)
Tax expense at the federal statutory tax rate	$	33,546		$	47,708		$	37,778
Increase (decrease) in tax expense from:
Tax-exempt income, net		(510	)		(829	)		(756	)
Modified endowment life contracts		(558	)		(921	)		(852	)
Share based compensation excess tax benefit		(917	)		(2,354	)		—
State tax expense, net of federal tax benefit		5,595			3,840			3,250
Write-down of net deferred tax asset		—			4,331			—
Utilization of tax credits:
New markets tax credits		(1,422	)		(1,151	)		(1,254	)
Low-income housing tax credits, net of amortization		(1,273	)		(1,589	)		(1,424	)
Other tax credits		—			—			(319	)
Other, net		(523	)		831			840
Total tax expense	$	33,938		$	49,866		$	37,263

The net deferred tax asset consisted of the following and is reported in other assets:

	December 31,
	2018			2017
	(Dollars in thousands)
Provision for loan losses	$	13,089		$	13,123
Unrealized net losses on securities		731			739
Write-downs of other real estate owned		462			473
Deferred compensation		2,209			2,113
Stock-based compensation		1,448			1,351
Investments in partnership interests		4,274			3,758
Other		963			275
Gross deferred tax assets		23,176			21,832
Premium on securities of banks acquired		(185	)		(219	)
Intangibles		(5,376	)		(3,359	)
Basis difference related to tax credits		(2,560	)		(2,713	)
Depreciation		(8,484	)		(4,563	)
Leveraged lease		—			(821	)
Prepaid expense deducted		(1,178	)		(887	)
Other		(181	)		(180	)
Gross deferred tax liabilities		(17,964	)		(12,742	)
Net deferred tax asset	$	5,212		$	9,090

The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if applicable, in income tax expense. During the years ended December 31, 2018, 2017 and 2016, the Company did not recognize or accrue any interest and penalties related to unrecognized tax benefits. Federal and various state income tax statutes dictate that tax returns filed in any of the previous three reporting periods remain open to examination, which includes the years 2016 to 2018. In addition, years 2013 to 2015 remain open due to amending returns in 2017. The Company has no open examinations with either the Internal Revenue Service or any state agency.

Management performs an analysis of the Company’s tax position annually and believes it is more likely than not that all of its tax positions will be utilized in future years.