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INCOME TAXES | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES On December 22, 2017, the Tax Act was signed into law. At December 31, 2017, the Company has not completed its accounting for the tax effect of enactment of the Tax Act; however, it made a reasonable estimate of the effects on its existing deferred tax balances. One of the provisions included in the Tax Act was the reduction in the maximum federal corporate income tax rate from 35% to 21%, effective January 1, 2018. As a result of this rate reduction, the Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21% for Federal tax purposes. However, the Company is still analyzing certain aspects of the Tax Act and redefining its calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional amount recorded related to the remeasurement of deferred tax assets and liabilities was $1.9 million. The Company also recognized a provisional estimate of $466,000 to reassess the value of its low income housing projects investments ("LIHTC investments"), The impact of these provisional estimates are included in the disclosures below. The provision for income taxes is comprised of the following components:
| Years Ended December 31
| 2017 |  | 2016 |  | 2015
| (Dollars in thousands)
Current expense |  |  |  |  |
Federal | $ | 28,852 |  |  | $ | 26,549 |  |  | $ | 11,946 |
State | 9,278 |  |  | 8,883 |  |  | 5,052 |
Total current expense | 38,130 |  |  | 35,432 |  |  | 16,998 |
Deferred expense (benefit) |  |  |  |  |
Federal | 7,953 |  |  | 153 |  |  | 8,466 |
State | 1,258 |  |  | (158 | ) |  | 1,754 |
Total deferred expense (benefit) | 9,211 |  |  | (5 | ) |  | 10,220 |
Total expense | $ | 47,341 |  |  | $ | 35,427 |  |  | $ | 27,218 |
The difference between the statutory federal income tax rate of 35% and the effective income tax rate reported for the last three years is detailed below:
| Years Ended December 31
| 2017 |  | 2016 |  | 2015
| (Dollars in thousands)
Computed statutory federal income tax provision | $ | 47,091 |  | 35.00 | % |  | $ | 39,226 |  | 35.00 | % |  | $ | 32,262 |  | 35.00 | %
State taxes, net of federal tax benefit | 6,817 |  | 5.07 | % |  | 5,643 |  | 5.03 | % |  | 4,500 |  | 4.88 | %
Revaluation of net deferred tax assets | 1,895 |  | 1.41 | % |  | — |  | — | % |  | — |  | — | %
Merger and other related costs (non-deductible) | 213 |  | 0.16 | % |  | 210 |  | 0.19 | % |  | 185 |  | 0.20 | %
Change in valuation allowance | 31 |  | 0.02 | % |  | 28 |  | 0.02 | % |  | 41 |  | 0.04 | %
New Markets Tax Credits | (3,960 | ) | (2.94 | )% |  | (6,360 | ) | (5.67 | )% |  | (6,514 | ) | (7.07 | )%
Increase in cash surrender value of life insurance | (1,445 | ) | (1.07 | )% |  | (1,431 | ) | (1.28 | )% |  | (1,292 | ) | (1.40 | )%
Stock-based compensation | (1,258 | ) | (0.94 | )% |  | — |  | — | % |  | — |  | — | %
Low Income Housing Project Investments | (1,253 | ) | (0.93 | )% |  | (1,641 | ) | (1.46 | )% |  | (1,182 | ) | (1.28 | )%
Nontaxable interest, net | (987 | ) | (0.73 | )% |  | (996 | ) | (0.89 | )% |  | (973 | ) | (1.06 | )%
Other, net | 197 |  | 0.15 | % |  | 748 |  | 0.67 | % |  | 191 |  | 0.22 | %
Total expense | $ | 47,341 |  | 35.20 | % |  | $ | 35,427 |  | 31.61 | % |  | $ | 27,218 |  | 29.53 | %
The tax-effected components of the net deferred tax asset at December 31 were as follows:
| 2017 |  | 2016
| (Dollars in thousands)
Deferred tax assets |  |  |
Accrued expenses not deducted for tax purposes | $ | 9,268 |  |  | $ | 15,401 |
Allowance for loan losses | 16,702 |  |  | 24,681 |
Deferred gain on sale leaseback transaction | 909 |  |  | 1,744 |
Employee and director equity compensation | 1,559 |  |  | 2,095 |
Federal Home Loan Bank borrowings fair value adjustment | 26 |  |  | 82 |
Loan basis difference fair value adjustment | 3,070 |  |  | 4,336 |
Net operating loss carry-forward | 127 |  |  | 69 |
Net unrealized loss on securities available for sale | 106 |  |  | — |
Other | 527 |  |  | 1,015 |
Gross deferred tax assets | 32,294 |  |  | 49,423 |
Valuation allowance | (121 | ) |  | (69 | )
Total deferred tax assets net of valuation allowance | $ | 32,173 |  |  | $ | 49,354 |
Deferred tax liabilities |  |  |
Core deposit and other intangibles | $ | 2,057 |  |  | $ | 3,040 |
Deferred loan fees, net | 4,275 |  |  | 5,407 |
Fixed assets | 5,270 |  |  | 6,168 |
Goodwill | 10,265 |  |  | 14,737 |
Net unrealized gain on securities available for sale | — |  |  | 105 |
Derivatives fair value adjustment | 524 |  |  | 454 |
Other | 4,307 |  |  | 3,909 |
Gross deferred tax liabilities | $ | 26,698 |  |  | $ | 33,820 |
Total net deferred tax asset | $ | 5,475 |  |  | $ | 15,534 |
Deferred tax assets are to be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of the tax benefit depends upon the existence of sufficient taxable income within the carry-back and future periods. The Company believes that it is more likely than not that its deferred tax assets as of December 31, 2017, excluding the deferred tax asset on certain state net operating losses, will be realized through the utilization of carry-back provisions to taxable income on prior years, future reversals of existing taxable temporary differences and by offsetting other future taxable income. The Company believes it is more likely than not that the deferred tax asset related to certain state net operating losses generated from the Company's investments in low income housing partnerships, which expire over a 20-year period, will not be realized and has recorded a valuation allowance of $121,000 at December 31, 2017, attributable to this deferred tax asset. The Company has utilized all federal net operating loss carry forwards acquired from recent acquisitions that were subject to annual change in ownership limitations under Internal Revenue Code Section 382 as of December 31, 2017. In addition, the Company does not have a federal net operating loss carry forward or general business credit carry forward subject to expiration as of December 31, 2017. Uncertainty in Income Taxes The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction as well as in various states. The Company is subject to U.S. federal, state and local income tax examinations by tax authorities for the 2014 through 2016 tax years including any related income tax filings from its recent acquisitions. The Company believes that its income tax returns have been filed based upon applicable statutes, regulations and case law in effect at the time of filing, however, the Internal Revenue Service ("IRS") and /or state jurisdictions could disagree with the Company's interpretation upon examination. The Company accounts for uncertainties in income taxes by providing a tax reserve for certain positions. The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits:
| (Dollars in thousands)
Balance at December 31, 2015 | $ | 81 |
Reduction of tax positions for prior years | — |
Increase for prior year tax position | — |
Increase for current year tax positions | 30 |
Balance at December 31, 2016 | $ | 111 |
Reduction of tax positions for prior years | — |
Increase for prior year tax positions | — |
Increase for current year tax positions | 31 |
Balance at December 31, 2017 | $ | 142 |
Increases to the Company's unrealized tax positions occur as a result of accruing for the unrecognized tax benefit as well the accrual of interest and penalties related to prior year positions. Decreases in the Company's unrealized tax positions occur as a result of the statute of limitation lapsing on prior year positions and/or settlements relating to outstanding positions. The table above does not include the indirect federal benefit of state tax positions of approximately $21,000. All of the Company’s unrecognized tax benefits, including the indirect federal benefit of state tax positions, are recorded as a component of income tax expense. During the years ended December 31, 2017 and 2016, the Company recognized approximately $18,000 and $11,000 in the provision for income taxes for interest and penalties related to uncertain tax positions. There were no such amounts recorded in the tax provision in 2015. As such, the Company has accrued approximately $29,000 and $11,000 for the payment of interest and penalties as of December 31, 2017 and 2016, respectively, which are not included in the table above.

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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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