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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | Note 16. Income Taxes Provision for Income Taxes The components of the Company’s provision for income taxes for the years ended December 31, 2021, December 31, 2020, and December 31, 2019, were as follows:
(dollars in thousands) |  | 2021 |  |  | 2020 |  |  | 2019 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 58,652 |  |  | $ | 65,840 |  |  | $ | 60,902 |
State |  |  | 10,510 |  |  |  | 12,066 |  |  |  | 14,426 |
Total Current |  |  | 69,162 |  |  |  | 77,906 |  |  |  | 75,328 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 2,254 |  |  |  | (31,783 | ) |  |  | (9,630 | )
State |  |  | 766 |  |  |  | (10,803 | ) |  |  | (5,785 | )
Total Deferred |  |  | 3,020 |  |  |  | (42,586 | ) |  |  | (15,415 | )
Provision for Income Taxes |  | $ | 72,182 |  |  | $ | 35,320 |  |  | $ | 59,913 |
The tax effects of fair value adjustments on AFS investment securities, the amortization of unrealized gains and losses related to investment securities transferred to HTM, and the minimum pension liability adjustment are recorded directly to consolidated shareholders’ equity. The Company elected to adopt ASU No. 2016-09 “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” in the first quarter of 2017, which requires the Company to record excess tax benefits related to stock options as a reduction of the provision for income taxes, whereas they were previously recognized in equity. The net tax benefit recorded directly to consolidated shareholders’ equity was $26.8 million for the year ended December 31, 2021. The net tax charge recorded directly to consolidated shareholders’ equity was $16.2 million and $7.1 million for the year ended December 31, 2020, and December 31, 2019, respectively. Deferred Tax Liabilities and Assets As of December 31, 2021, and December 31, 2020, significant components of the Company’s deferred tax liabilities and assets were as follows:
|  | December 31, |
(dollars in thousands) |  | 2021 |  |  | 2020 |
Deferred Tax Liabilities: |  |  |  |  |  |  |  |
Accelerated Depreciation |  | $ | (8,131 | ) |  | $ | (8,042 | )
Accrued Pension Cost |  |  | (11,270 | ) |  |  | (11,270 | )
Federal Home Loan Bank of Des Moines Stock |  |  | (2,885 | ) |  |  | (3,416 | )
Lease Transactions |  |  | (37,585 | ) |  |  | (41,726 | )
Operating Lease Liabilities |  |  | (25,348 | ) |  |  | (26,387 | )
Energy Tax Credits |  |  | — |  |  |  | (674 | )
Net Unrealized Gains on Investments Securities |  |  | — |  |  |  | (18,407 | )
Investment in Variable Interest Entities |  |  | (1,657 | ) |  |  | (2,725 | )
Deferred Loan Fees |  |  | (3,845 | ) |  |  | (4,736 | )
Originated Mortgage Servicing Rights |  |  | (6,068 | ) |  |  | (5,579 | )
Other |  |  | (915 | ) |  |  | (1,124 | )
Gross Deferred Tax Liabilities |  |  | (97,704 | ) |  |  | (124,086 | )
Deferred Tax Assets: |  |  |  |  |  |  |  |
Allowance for Credit Losses |  |  | 43,348 |  |  |  | 57,840 |
Minimum Pension Liability |  |  | 12,082 |  |  |  | 13,430 |
Accrued Expenses |  |  | 22,416 |  |  |  | 17,629 |
Postretirement Benefit Obligations |  |  | 7,170 |  |  |  | 7,980 |
Capital Lease Expenses |  |  | 2,163 |  |  |  | 2,168 |
Operating Lease Right-of-Use Assets |  |  | 27,360 |  |  |  | 28,473 |
Restricted Stock |  |  | 4,442 |  |  |  | 3,669 |
Net Unrealized Losses on Investments Securities |  |  | 11,868 |  |  |  | — |
Deductible State and Local Taxes |  |  | 3,239 |  |  |  | 3,366 |
Low Income Housing Investments |  |  | 3,007 |  |  |  | 3,648 |
Other |  |  | 6,089 |  |  |  | 6,204 |
Gross Deferred Tax Assets Before Valuation Allowance |  |  | 143,184 |  |  |  | 144,407 |
Valuation Allowance |  |  | (3,203 | ) |  |  | (3,597 | )
Gross Deferred Tax Assets After Valuation Allowance |  |  | 139,981 |  |  |  | 140,810 |
Net Deferred Tax Assets |  | $ | 42,277 |  |  | $ | 16,724 |
Both positive and negative evidence were considered by management in determining the need for a valuation allowance. Negative evidence included the uncertainty regarding the generation of capital gains in future years and restrictions on the ability to sell low-income housing investments during periods when carrybacks/carryforwards of capital losses are allowed. Positive evidence included capital gains in the carryback years. After considering all available evidence, management determined that a valuation allowance to offset deferred tax assets related to low-income housing investments that can only be used to offset capital gains was appropriate. Management determined that a valuation allowance was not required for the remaining deferred tax assets because it is more likely than not that these assets will be realized through future reversals of existing taxable temporary differences, and there will be sufficient future taxable income exclusive of reversing temporary differences. As of December 31, 2021, and December 31, 2020, the Company carried a valuation allowance of $3.2 million and $3.6 million, respectively, related to the deferred tax assets established in connection with the low-income housing investments. Certain events covered by Internal Revenue Code Section 593(e) will trigger a recapture of base year reserves of acquired thrift institutions. The base year reserves of acquired thrift institutions would be recaptured if an entity ceases to qualify as a bank for federal income tax purposes. The base year reserves of thrift institutions also remain subject to income tax penalty provisions that, in general, require recapture upon certain stock redemptions of, and excess distributions to, shareholders. As of December 31, 2021, retained earnings included $18.2 million of base year reserves for which the deferred federal income tax liability of $4.8 million has not been recognized. Effective Tax Rate The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the years ended December 31, 2021, December 31, 2020, and December 31, 2019:
|  | 2021 |  |  | 2020 |  |  | 2019 |
Statutory Federal Income Tax Rate |  |  | 21.00 | % |  |  | 21.00 | % |  |  | 21.00 | %
Increase (Decrease) in Income Tax Rate Resulting From: |  |  |  |  |  |  |  |  |  |  |  |
State Taxes, Net of Federal Income Tax |  |  | 2.85 |  |  |  | 0.81 |  |  |  | 2.53 |
Low-Income Housing Investments |  |  | 0.77 |  |  |  | 0.82 |  |  |  | 0.60 |
Investment Tax Credits |  |  | (0.35 | ) |  |  | (1.24 | ) |  |  | (0.84 | )
Bank-Owned Life Insurance |  |  | (0.48 | ) |  |  | (0.82 | ) |  |  | (0.51 | )
Tax-Exempt Income |  |  | (0.24 | ) |  |  | (0.50 | ) |  |  | (0.53 | )
Leveraged Lease |  |  | (0.10 | ) |  |  | (0.56 | ) |  |  | (1.54 | )
Other |  |  | (1.28 | ) |  |  | (0.83 | ) |  |  | 0.25 |
Effective Tax Rate |  |  | 22.17 | % |  |  | 18.68 | % |  |  | 20.96 | %
Unrecognized Tax Benefits The Company is required to record a liability, referred to as an unrecognized tax benefit (“UTB”), for the entire amount of benefit taken in a prior or future income tax return when the Company determines that a tax position has a less than 50% likelihood of being accepted by the taxing authority. The following presents a reconciliation of the Company’s liability for UTBs for the years ended December 31, 2021, December 31, 2020, and December 31, 2019:
(dollars in thousands) |  | 2021 |  |  | 2020 |  |  | 2019 |
Unrecognized Tax Benefits at Beginning of Year |  | $ | 5,403 |  |  | $ | 6,120 |  |  | $ | 5,541 |
Gross Increases, Related to Tax Positions Taken in a Prior Period |  |  | 261 |  |  |  | 374 |  |  |  | 673 |
Gross Decreases, Related to Tax Positions Taken in a Prior Period |  |  | (1,285 | ) |  |  | — |  |  |  | — |
Gross Increases, Related to Current Period Tax Positions |  |  | 234 |  |  |  | 222 |  |  |  | 715 |
Lapse of Statute of Limitations |  |  | (598 | ) |  |  | (1,313 | ) |  |  | (809 | )
Unrecognized Tax Benefits at End of Year |  | $ | 4,015 |  |  | $ | 5,403 |  |  | $ | 6,120 |
As of December 31, 2021, and December 31, 2020, $4.0 million and $5.4 million, respectively, in liabilities for UTBs were related to UTBs that if reversed would have an impact on the Company’s effective tax rate. Management believes that it is reasonably possible that the Company’s liability for UTBs could further decrease as a result of the expiration of statutes of limitations within the next 12 months. However, management is currently not able to estimate a range of possible change in the amount of the liability for UTBs recorded as of December 31, 2021. The Company classifies interest and penalties, if any, related to the liability for UTBs as a component of the provision for income taxes. The recorded net tax benefit for interest and penalties was less than $0.1 million for the year ended December 31, 2021. For the years ended, December 31, 2020 and December 31, 2019, the Company recorded a net tax provision of less than $0.1 million and $0.5 million, respectively, for interest and penalties. As of December 31, 2021, and December 31, 2020, the balance of the accrual for possible interest and penalties was $1.5 million. The federal tax returns for 2018 through 2020 remain subject to examination. The Company's State of Hawaii income tax returns for 2016 through 2020 remain subject to examination by the taxing authorities.

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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 -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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