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

NOTE 16. INCOME TAXES

On March 27, 2020, the CARES Act was signed into law. The Act provided for the opportunity to carryback certain federal net operating losses up to five years. Wesbanco’s net operating losses had previously been recorded at the current statutory rate of 21%. As a result of the CARES Act, Wesbanco recorded an income tax benefit of $0.2 million in 2020 in recognition of the rate differential between the current statutory rate and the rate in effect for which year the net operating loss will be carried back.

Reconciliation from the federal statutory income tax rate to the effective tax rate is as follows:

 

 

 

For the Years Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Federal statutory tax rate

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

Net tax-exempt interest income on securities and loans of state and
   political subdivisions

 

 

(1.8

%)

 

 

(4.2

%)

 

 

(3.3

%)

State income taxes, net of federal tax effect

 

 

2.3

%

 

 

1.9

%

 

 

1.7

%

Bank-owned life insurance

 

 

(0.6

%)

 

 

(1.1

%)

 

 

(0.6

%)

General business credits

 

 

(1.9

%)

 

 

(3.7

%)

 

 

(2.2

%)

All other—net

 

 

0.7

%

 

 

2.0

%

 

 

1.2

%

Effective tax rate

 

 

19.7

%

 

 

15.9

%

 

 

17.8

%

 

The provision for income taxes applicable to income before taxes consists of the following:

 

 

 

For the Years Ended December 31,

 

(in thousands)

 

2021

 

 

2020

 

 

2019

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

33,042

 

 

$

27,924

 

 

$

22,540

 

State

 

 

7,655

 

 

 

5,629

 

 

 

3,977

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

17,679

 

 

 

(8,418

)

 

 

7,736

 

State

 

 

1,213

 

 

 

(2,100

)

 

 

88

 

Total

 

$

59,589

 

 

$

23,035

 

 

$

34,341

 

 

The following income tax amounts were recorded in shareholders’ equity as elements of other comprehensive income:

 

(in thousands)

 

2021

 

 

2020

 

 

2019

 

Securities and defined benefit pension plan unrecognized items

 

$

(11,322

)

 

$

9,730

 

 

$

11,570

 

 

Deferred tax assets and liabilities consist of the following:

 

 

 

December 31,

 

(in thousands)

 

2021

 

 

2020

 

 

2019

 

Deferred tax assets:

 

 

 

 

 

 

 

 

 

Allowance for loan losses

 

$

29,208

 

 

$

44,859

 

 

$

12,788

 

Compensation and benefits

 

 

1,154

 

 

 

6,894

 

 

 

7,144

 

Security gains

 

 

1,565

 

 

 

2,113

 

 

 

3,031

 

Non-accrual interest income

 

 

766

 

 

 

1,135

 

 

 

1,297

 

Tax credit carryforwards

 

 

—

 

 

 

—

 

 

 

149

 

Net operating loss carryforwards

 

 

6,480

 

 

 

5,472

 

 

 

6,923

 

Fair value adjustments on securities available-for-sale

 

 

1,484

 

 

 

—

 

 

 

—

 

Lease accrual

 

 

11,399

 

 

 

13,530

 

 

 

13,787

 

Other

 

 

4,617

 

 

 

5,441

 

 

 

2,314

 

Gross deferred tax assets

 

 

56,673

 

 

 

79,444

 

 

 

47,433

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

(3,748

)

 

 

(3,414

)

 

 

(4,014

)

Accretion on securities

 

 

(251

)

 

 

(274

)

 

 

(339

)

Deferred fees and costs

 

 

(2,368

)

 

 

(3,018

)

 

 

(2,388

)

Purchase accounting adjustments

 

 

(9,996

)

 

 

(8,669

)

 

 

(2,787

)

Fair value adjustments on securities available-for-sale

 

 

—

 

 

 

(14,865

)

 

 

(5,749

)

Partnership adjustments

 

 

(127

)

 

 

(555

)

 

 

(521

)

Lease - right of use assets

 

 

(10,342

)

 

 

(12,438

)

 

 

(13,064

)

Other

 

 

(1,144

)

 

 

(168

)

 

 

(40

)

Gross deferred tax liabilities

 

 

(27,976

)

 

 

(43,401

)

 

 

(28,902

)

Net deferred tax assets

 

$

28,697

 

 

$

36,043

 

 

$

18,531

 

 

No valuation allowance was established for any deferred tax assets, since management believes that deferred tax assets are likely to be realized through future reversals of existing taxable temporary differences and future taxable income.

As a result of the acquisition of YCB in 2016 and OLBK in 2019, Wesbanco has federal net operating loss (“NOL”) carryforwards of $23.5 million, which expire beginning in 2033 and 2036; respectively. Wesbanco has Maryland NOL carryforwards of $18.0 million, which begin expiring in 2035. Wesbanco has Kentucky NOL carryforwards of $36.8 million, which begin expiring in 2025. The use of the federal NOL and other carryforwards are limited by Internal Revenue Code Section 382, but they are currently expected to be utilized before their respective expiration dates.

As a result of the previous acquisitions of YCB, ESB Financial Corporation, Fidelity Bancorp, Inc., Western Ohio Financial Corporation, Winton Financial Corporation and Oak Hill Financial, Inc., retained earnings at both December 31, 2021 and 2020 included $45.9 million of qualifying and non-qualifying tax bad debt reserves existing as of December 31, 1987, upon which no provision for income taxes has been recorded. The related amount of unrecognized deferred tax liability is $10.8 million for both 2021 and 2020. If this portion of retained earnings is used in the future for any purpose other than to absorb bad debts, it would be added to future taxable income.

Federal and state income taxes applicable to securities transactions totaled $0.2 million, $1.0 million and $1.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Wesbanco had $0.2 million and $0.3 million of unrecognized tax benefits and interest as of December 31, 2021 and 2020, respectively. As of December 31, 2021, $0.2 million of these tax benefits would affect the effective tax rate if recognized. At December 31, 2021 and December 31, 2020, accrued interest related to uncertain tax positions was immaterial. Wesbanco provides for interest and penalties related to uncertain tax positions as part of its provision for federal and state income taxes.

Wesbanco is subject to U.S. federal income tax as well as to tax in various state income tax jurisdictions. Wesbanco and its prior acquired companies are no longer subject to any income tax examinations for years prior to 2018.

Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and the federal income tax benefit of unrecognized state tax benefits) is as follows:

 

 

 

For the Years Ended December 31,

 

(in thousands)

 

2021

 

 

2020

 

 

2019

 

Balance at beginning of year

 

$

324

 

 

$

434

 

 

$

465

 

Additions based on tax positions related to the current year

 

 

3

 

 

 

—

 

 

 

58

 

Reductions for tax positions of prior years

 

 

—

 

 

 

—

 

 

 

—

 

Reductions due to the statute of limitations

 

 

(101

)

 

 

(110

)

 

 

(89

)

Settlements

 

 

—

 

 

 

—

 

 

 

—

 

Balance at end of year

 

$

226

 

 

$

324

 

 

$

434