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INCOME TAXES | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The provision for income taxes is comprised of the following components:
| Years Ended December 31
| 2019 |  | 2018 |  | 2017
| (Dollars in thousands)
Current expense |  |  |  |  |
Federal | $ | 27,980 |  |  | $ | 25,129 |  |  | $ | 28,852 |
State | 14,359 |  |  | 13,672 |  |  | 9,278 |
Total current expense | 42,339 |  |  | 38,801 |  |  | 38,130 |
Deferred expense (benefit) |  |  |  |  |
Federal | 9,080 |  |  | (3,080 | ) |  | 7,953 |
State | 1,514 |  |  | (1,417 | ) |  | 1,258 |
Total deferred expense (benefit) | 10,594 |  |  | (4,497 | ) |  | 9,211 |
Total expense | $ | 52,933 |  |  | $ | 34,304 |  |  | $ | 47,341 |
The difference between the statutory federal income tax rate and the effective income tax rate reported for the last three years is detailed below:
| Years Ended December 31
| 2019 |  | 2018 |  | 2017
| (Dollars in thousands)
Computed statutory federal income tax provision | $ | 45,803 |  | 21.00 | % |  | $ | 32,744 |  | 21.00 | % |  | $ | 47,091 |  | 35.00 | %
State taxes, net of federal tax benefit | 12,262 |  | 5.63 | % |  | 9,633 |  | 6.18 | % |  | 6,817 |  | 5.07 | %
Merger and other related costs (non-deductible) | 582 |  | 0.27 | % |  | 130 |  | 0.08 | % |  | 213 |  | 0.16 | %
Change in valuation allowance | 17 |  | 0.01 | % |  | 49 |  | 0.03 | % |  | 31 |  | 0.02 | %
Revaluation of net deferred tax assets | — |  | — | % |  | — |  | — | % |  | 1,895 |  | 1.41 | %
New Markets Tax Credits | (2,675 | ) | (1.23 | )% |  | (3,960 | ) | (2.54 | )% |  | (3,960 | ) | (2.94 | )%
Increase in cash surrender value of life insurance | (1,144 | ) | (0.52 | )% |  | (1,160 | ) | (0.74 | )% |  | (1,445 | ) | (1.07 | )%
Low Income Housing Project Investments | (1,696 | ) | (0.78 | )% |  | (1,030 | ) | (0.66 | )% |  | (1,253 | ) | (0.93 | )%
Stock-based compensation | (824 | ) | (0.38 | )% |  | (885 | ) | (0.57 | )% |  | (1,258 | ) | (0.94 | )%
Nontaxable interest, net | (757 | ) | (0.35 | )% |  | (566 | ) | (0.36 | )% |  | (987 | ) | (0.73 | )%
Other, net | 1,365 |  | 0.63 | % |  | (651 | ) | (0.42 | )% |  | 197 |  | 0.15 | %
Total expense | $ | 52,933 |  | 24.28 | % |  | $ | 34,304 |  | 22.00 | % |  | $ | 47,341 |  | 35.20 | %
On December 22, 2017, the Tax Act was signed into law, reducing the corporate income tax rate from 35% to 21%. At December 31, 2017, the Company had 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. As a result of this rate reduction, the Company remeasured certain deferred tax assets and liabilities at December 31, 2017 based on the rates at which they are expected to reverse in the future, which is generally 21% for federal tax purposes. This remeasurement of deferred tax assets and liabilities resulted in a provisional amount recorded of $1.9 million. Also at December 31, 2017, the Company had recognized a provisional estimate of $466,000 to reassess the value of its low income housing projects investments ("LIHTC investments"). As of December 31, 2018, the Company completed its accounting for all of the enactment-date income tax effects of the Tax Act. The Company's tax expense for the year ended December 31, 2018 included an increase of $71,000 related to the provisional estimate recorded on the remeasurement of deferred tax asset and liabilities in 2017, mainly attributable to remeasurement of temporary differences. There was no change to this provisional amount recorded in 2017 related to the Company's LIHTC investments. The tax-effected components of the net deferred tax asset at December 31 of the years presented were as follows:
| 2019 |  | 2018
| (Dollars in thousands)
Deferred tax assets |  |  |
Accrued expenses not deducted for tax purposes | $ | 13,855 |  |  | $ | 11,922 |
Allowance for loan losses | 18,993 |  |  | 17,764 |
Employee and director equity compensation | 1,708 |  |  | 1,636 |
Loan basis difference fair value adjustment | 6,804 |  |  | 4,761 |
Net operating loss carry-forward | 2,546 |  |  | 170 |
Net unrealized loss on securities available for sale | — |  |  | 1,850 |
Operating lease liability | 16,393 |  |  | — |
Other | 1,311 |  |  | 1,561 |
Gross deferred tax assets | $ | 61,610 |  |  | $ | 39,664 |
Valuation allowance | (187 | ) |  | (170 | )
Total deferred tax assets net of valuation allowance | $ | 61,423 |  |  | $ | 39,494 |
Deferred tax liabilities |  |  |
Core deposit and other intangibles | $ | 5,802 |  |  | $ | 3,803 |
Deferred loan fees, net | 4,944 |  |  | 4,759 |
Derivatives fair value adjustment | 6,461 |  |  | 2,413 |
Fixed assets | 8,194 |  |  | 5,259 |
Goodwill | 10,645 |  |  | 10,388 |
Prepaid pension | 3,487 |  |  | 3,483 |
Right of use asset | 15,911 |  |  | — |
Other | 3,965 |  |  | 1,139 |
Gross deferred tax liabilities | $ | 59,409 |  |  | $ | 31,244 |
Total net deferred tax asset | $ | 2,014 |  |  | $ | 8,250 |
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 in future periods. The Company believes that it is more likely than not that its deferred tax assets as of December 31, 2019, excluding the deferred tax asset on certain state net operating losses, will be realized through 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 $187,000 at December 31, 2019, attributable to this deferred tax asset. The Company has a federal operating loss carry forward of $11.2 million acquired from a recent acquisition that is subject to annual change in ownership limitations under Internal Revenue Code Sec. 382 as of December 31, 2019. The Company does not have a general business credit carry forward subject to expiration as of December 31, 2019. 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 2016 through 2018 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, 2017 | $ | 142 |
Increase for current year tax positions | 73 |
Balance at December 31, 2018 | 215 |
Reduction of tax positions for prior years | (127 | )
Increase for current year tax positions | 444 |
Balance at December 31, 2019 | $ | 532 |
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 $116,000. 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 year ended December 31, 2019, the Company recognized a benefit of approximately $10,000, and during the years ended December 31, 2018 and 2017 recognized expense of $24,000 and $18,000, respectively, in the provision for income taxes for interest and penalties related to uncertain tax positions. Accordingly, the Company has accrued approximately $43,000, $53,000 and $29,000 for the payment of interest and penalties as of December 31, 2019, 2018 and 2017, 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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