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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes |
NOTE 13 - INCOME TAXES
The components of income taxes are as follows:
| 2023 |  | 2022 |  | 2021
| (dollars in thousands)
Current tax expense: |  |  |  |  |
Federal | $ | 49,707 |  |  | $ | 44,478 |  |  | $ | 35,692 |
State | 11,137 |  |  | 6,906 |  |  | 10,646 |
Total current tax expense | 60,844 |  |  | 51,384 |  |  | 46,338 |
Deferred tax (benefit) expense: |  |  |  |  |
Federal | 3,021 |  |  | 8,974 |  |  | 11,081 |
State | 576 |  |  | (324) |  |  | 1,329 |
Total deferred tax (benefit) expense | 3,597 |  |  | 8,650 |  |  | 12,410 |
Total income tax expense | $ | 64,441 |  |  | $ | 60,034 |  |  | $ | 58,748 |
The differences between the effective income tax rate and the federal statutory income tax rate are as follows:
| 2023 |  | 2022 |  | 2021
Statutory tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Tax credit investments | (1.3) |  |  | (2.0) |  |  | (3.0) |
Tax-exempt income | (4.2) |  |  | (3.5) |  |  | (3.0) |
Bank owned life insurance | (0.8) |  |  | (0.7) |  |  | (0.5) |
State income taxes, net of federal benefit | 2.6 |  |  | 1.2 |  |  | 2.6 |
Executive compensation | 0.3 |  |  | 0.3 |  |  | 0.1 |
FDIC Premium | 0.5 |  |  | 0.3 |  |  | 0.3 |
Other, net | 0.4 |  |  | 0.7 |  |  | 0.1 |
Effective income tax rate | 18.5 | % |  | 17.3 | % |  | 17.6 | %
The net DTA recorded by the Corporation is included in other assets and consists of the following tax effects of temporary differences as of December 31:
| 2023 |  | 2022
| (dollars in thousands)
Deferred tax assets: |  |  |
Unrealized holding losses on securities | $ | 90,671 |  |  | $ | 110,689 |
Allowance for credit losses | 71,013 |  |  | 65,481 |
State loss carryforwards | 27,948 |  |  | 26,421 |
Lease liability | 21,570 |  |  | 21,264 |
Other accrued expenses | 11,082 |  |  | 10,059 |
Deferred compensation | 10,215 |  |  | 9,014 |
Intangible assets | 7,460 |  |  | 3,023 |
Stock-based compensation | 5,129 |  |  | 4,681 |
Tax credit carryforwards | 4,995 |  |  | 5,146 |
Other | 5,469 |  |  | 5,223 |
Total gross deferred tax assets | $ | 255,552 |  |  | $ | 261,001 |
Deferred tax liabilities: |  |  |
Equipment lease financing | 47,345 |  |  | 26,560 |
Right-of-use-asset | 20,022 |  |  | 19,276 |
MSRs | 7,158 |  |  | 7,750 |
Acquisition premiums/discounts | 5,508 |  |  | 5,492 |
Postretirement and defined benefit plans | 3,438 |  |  | 1,755 |
Tax credit investments | 1,747 |  |  | 3,393 |
Premises and equipment | 1,678 |  |  | 5,775 |
Other | — |  |  | 16 |
Total gross deferred tax liabilities | $ | 86,896 |  |  | $ | 70,017 |
Net deferred tax asset, before valuation allowance | 168,656 |  |  | 190,984 |
Valuation allowance | (27,948) |  |  | (26,421) |
Net deferred tax asset | $ | 140,708 |  |  | $ | 164,563 |
In assessing the realizability of DTAs, management considers whether it is more likely than not that some or all of the DTAs will not be realized. The ultimate realization of DTAs is dependent upon the generation of future taxable income and/or capital gain 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, such as those that may be implemented to generate capital gains, in making this assessment. The valuation allowance relates to state net operating loss carryforwards for which realizability is uncertain. As of December 31, 2023 and 2022, the Corporation had state net operating loss carryforwards of approximately $354 million and $335 million, respectively, which are available to offset future state taxable income, and expire at various dates through 2043. As of December 31, 2023, based on the level of historical taxable income and projections for future taxable income over the periods in which the DTAs are deductible, management believes it is more likely than not that the Corporation will realize the benefits of its DTAs, net of the valuation allowance. As of December 31, 2023, the Corporation had tax credit carryforwards related to TCIs of approximately $5 million. The Corporation recorded a DTA of $5 million, reflecting the benefit of these tax credit carryforwards, which will begin to expire in 2042 if not yet utilized. Uncertain Tax Positions The following table summarizes the changes in unrecognized tax benefits for the years ended December 31:
| 2023 |  | 2022 |  | 2021
| (dollars in thousands)
Balance at beginning of year | $ | 1,228 |  |  | $ | 1,673 |  |  | $ | 2,151 |
Current period tax positions | 147 |  |  | 112 |  |  | 120 |
Lapse of statute of limitations | (331) |  |  | (557) |  |  | (598) |
Balance at end of year | $ | 1,044 |  |  | $ | 1,228 |  |  | $ | 1,673 |
Virtually all of the Corporation's unrecognized tax benefits are for positions that are taken on an annual basis on state tax returns. Increases to unrecognized tax benefits will occur as a result of accruing for the nonrecognition of the position for the current year. Decreases will occur as a result of the lapsing of the statute of limitations for the oldest outstanding year which includes the position. These offsetting increases and decreases are likely to continue in the future, including over the next twelve months. While the net effect on total unrecognized tax benefits during this period cannot be reasonably estimated, approximately $0.1 million is expected to reverse in 2024 due to lapsing of the statute of limitations. Decreases can also occur throughout the settlement of positions with taxing authorities. As of December 31, 2023, if recognized, all of the Corporation's unrecognized tax benefits would impact the effective tax rate. Not included in the table above is $0.2 million of federal income tax benefit on unrecognized state tax benefits which, if recognized, would also impact the effective tax rate. Interest accrued related to unrecognized tax benefits is recorded as a component of income tax expense. Penalties, if incurred, would also be recognized in income tax expense. The Corporation recognized approximately $138 thousand and $121 thousand of recoveries in 2023 and 2022, respectively, for interest and penalties in income tax expense related to unrecognized tax positions. As of December 31, 2023 and 2022, total accrued interest and penalties related to unrecognized tax positions were approximately $0.3 million and $0.5 million, respectively. The Corporation files income tax returns in the federal and various state jurisdictions. In most cases, unrecognized tax benefits are related to tax years that remain subject to examination by the relevant taxing authorities. With few exceptions, the Corporation is no longer subject to federal, state and local examinations by tax authorities for years before 2020. Tax Credit Investments The TCIs are included in other assets, with any unfunded equity commitments recorded in other liabilities on the consolidated balance sheets and changes are reflected in change in tax credit investments in the consolidated statements of cash flows. In 2023, the Corporation adopted ASU 2023-02, which allows all TCIs to qualify for the proportional amortization method if: (1) it is probable that the income tax credits allocatable to the Corporation will be available; (2) the Corporation does not have the ability to exercise significant influence over the operating and financial policies of the underlying project; (3) substantially all of the projected benefits are from income tax credits and other income tax benefits; (4) the Corporation's projected yield based solely on the cash flows from the income tax credits and other income tax benefits is positive; and (5) the Corporation is a limited liability investor in the limited liability entity for both legal and tax purposes, and the Corporation’s liability is limited to its capital investment. See "Note 1 - Summary of Significant Accounting Policies" in the Notes to the Consolidated Financial Statements. All TCIs held as of December 31, 2023 that qualify for the proportional amortization method, are amortized over the period the Corporation expects to receive the tax credits, with the expense included within income taxes on the consolidated statements of income and net income in the consolidated statements of cash flows. All TCIs are evaluated for impairment at the end of each reporting period. There were no impairments recorded against TCIs during 2023. The following table presents the balances of the Corporation's TCIs and related unfunded commitments as of December 31:
|  |  | 2023 |  | 2022
Included in other assets: |  | (dollars in thousands)
Affordable housing tax credit investments, net |  | $ | 170,115 |  |  | $ | 161,103 |
Other tax credit investments, net |  | 35,907 |  |  | 61,077 |
| Total TCIs, net |  | $ | 206,022 |  |  | $ | 222,180 |
Included in other liabilities: |  |  |  |
Unfunded affordable housing tax credit commitments |  | $ | 58,312 |  |  | $ | 53,108 |
Other tax credit liabilities |  | 28,361 |  |  | 46,814 |
| Total unfunded tax credit commitments and liabilities |  | $ | 86,673 |  |  | $ | 99,922 |
The following table presents other information relating to the Corporation's TCIs for the years ended December 31:
|  | 2023 |  | 2022 |  | 2021
|  | (dollars in thousands)
Components of income taxes: |  |  |  |  |
Tax credits and benefits | $ | (28,748) |  |  | $ | (27,154) |  |  | $ | (28,141) |
Amortization of tax credits and benefits, net of tax benefits | 23,446 |  |  | 19,298 |  |  | 17,378 |
Deferred tax expense | 610 |  |  | 766 |  |  | 639 |
| Total reduction in income tax expense | $ | (4,692) |  |  | $ | (7,090) |  |  | $ | (10,124) |
Amortization of TCIs: |  |  |  |  |
| Total amortization of TCIs | $ | — |  |  | $ | 2,783 |  |  | $ | 6,187 |

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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/disclosureRef -Topic 946 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 13 -Publisher FASB -URI https://asc.fasb.org//1943274/2147480990/946-20-50-13 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//740/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 14 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-14 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-21 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 270 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482526/740-270-50-1 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 17 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-17 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 30 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482603/740-30-50-2 + Details
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