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Income Taxes

12 Months Ended

Dec. 31, 2020

Note 12. Income Taxes

The components of income taxes consist of (dollars in thousands):


	Years Ended December 31,
	2020		2019		2018
Current expense:
Federal	$	21,027	$	22,479	$	18,076
State		12,144		8,910		9,807
Deferred expense:
Federal		(3,657)		(380)		5,068
State		(1,652)		476		2,048
Total income tax expense	$	27,862	$	31,485	$	34,999

A reconciliation of federal and state income taxes at statutory rates to the income taxes included in the accompanying Consolidated Statements of Income is as follows:


	% of Pretax Income
	Years Ended December 31,
	2020		2019		2018
Income tax at federal statutory rate	21.0	%	21.0	%	21.0	%
Effect of:
Tax-exempt interest, net	(1.6)	%	(1.7)	%	(1.3)	%
Stock incentive	0.2	%	(0.1)	%	(0.3)	%
State income taxes, net	6.5	%	5.5	%	7.3	%
Income on bank owned life insurance	(0.9)	%	(0.9)	%	(0.6)	%
Tax credit investments	(3.2)	%	(1.3)	%	—	%
Other, net	(0.3)	%	0.9	%	—	%
	21.7	%	23.4	%	26.1	%

Net deferred taxes at December 31, 2020 and 2019, reported in other assets or other liabilities in the accompanying Consolidated Balance Sheets, include the following amounts of deferred tax assets and liabilities (dollars in thousands).


	2020		2019
Deferred tax assets:
Allowance for credit losses	$	30,332	$	15,416
Unrealized loss on cash flow hedge		871		80
Stock-based compensation		2,975		2,069
Deferred compensation		66		166
Affordable housing partnerships and other investments		—		697
Purchase accounting adjustments		4,470		11,301
Accrued vacation		610		827
Lease liabilities		2,142		2,650
Employee costs		1,598		1,048
Other		431		809
Total deferred tax assets	$	43,495	$	35,063

Deferred tax liabilities:
Unrealized gain on securities available for sale		(14,151)		(6,032)
Basis in premises and equipment		(348)		(4,222)
Affordable housing partnerships and other investments		(1,995)		(1,411)
Purchase accounting adjustments		(1,835)		(1,023)
Mortgage servicing assets		(3,418)		(3,717)
Basis in core deposit, customer intangible assets, and asset purchase goodwill		(12,714)		(17,120)
Deferred loan origination costs		(2,654)		(1,730)
Right of use assets		(2,130)		(2,633)
Unrealized gain on equity securities		(276)		(593)
Other		(405)		(508)
Total deferred tax liabilities	$	(39,926)	$	(38,989)

Net deferred tax asset (liability)	$	3,569	$	(3,926)

At December 31, 2020, the Company had no net operating loss carryforward.

Management believes that it is more likely than not that the other deferred tax assets included in the accompanying Consolidated Balance Sheets will be fully realized. The Company has determined that no valuation allowance is required for any deferred tax assets as of December 31, 2020 or 2019.

- 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.

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