INCOME TAXES
The components of income taxes are as follows:
|
| | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | 2016 | | 2015 |
| | (in thousands) |
Current tax provision | | $ | 10,565 |
| | $ | 22,308 |
| | $ | 16,991 |
|
Deferred tax expense (benefit) | | 16,904 |
| | (987 | ) | | (824 | ) |
Total provision for income taxes | | $ | 27,469 |
| | $ | 21,321 |
| | $ | 16,167 |
|
The Tax Cuts and Jobs Act was enacted on December 22, 2017, resulting in changes in the U.S. corporate tax rates, business-related exclusions, deductions and credits. Enactment of the Tax Cuts and Jobs Act requires the Company to reflect the changes associated with the law's provisions in its consolidated financial statements as of and for the year ended December 31, 2017. The Company recorded an increase in its net deferred tax asset of $1.3 million to reflect the reduction in the federal corporate income tax rate from 35% to 21%.
During 2017, the Company implemented a tax planning strategy which resulted in an increase in deferred tax liabilities, a higher deferred tax provision and an $1.9 million excise tax recorded through current tax expense . Consequently, as a result of the Tax Cuts and Jobs Act being passed and the effect of the tax planning strategy, the net impact on the financial statements was $602,000 in additional tax expense.
The income tax provision reconciled to the income taxes that would have been computed at the statutory federal rate of 35% is as follows:
|
| | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | 2016 | | 2015 |
| | (in thousands) |
Federal income tax, at statutory rates | | $ | 28,017 |
| | $ | 21,994 |
| | $ | 17,028 |
|
Increase (deduction) in taxes resulting from: | | | | | | |
Tax-exempt income | | (1,652 | ) | | (1,671 | ) | | (1,467 | ) |
Excise tax on real estate investment trust ("REIT") dividend | | 1,945 |
| | — |
| | — |
|
Adjustment to net deferred tax asset for Tax Cuts and Jobs Act | | (1,343 | ) | | — |
| | — |
|
State income tax, net of federal income tax effect | | 931 |
| | 552 |
| | 132 |
|
Excess tax benefits from employee share-based payments | | (587 | ) | | — |
| | — |
|
Other, net | | 158 |
| | 446 |
| | 474 |
|
Provision for income taxes | | $ | 27,469 |
| | $ | 21,321 |
| | $ | 16,167 |
|
The net deferred tax asset consisted of the following:
|
| | | | | | | | |
| | December 31, |
| | 2017 | | 2016 |
Deferred tax assets: | | (in thousands) |
Allowance for loan and lease losses | | $ | 10,662 |
| | $ | 13,775 |
|
Stock based compensation plans | | 769 |
| | 1,095 |
|
Purchase accounting fair market value adjustments | | 1,441 |
| | 2,752 |
|
Non-accrued interest | | 394 |
| | 730 |
|
Deferred compensation | | 2,007 |
| | 2,648 |
|
Depreciation and amortization | | 805 |
| | 1,486 |
|
Other-than-temporary impairment loss on investment securities | | 77 |
| | 255 |
|
Unrealized losses on securities available for sale | | 1,108 |
| | 292 |
|
Other, net | | 675 |
| | 767 |
|
Gross deferred tax assets | | 17,938 |
| | 23,800 |
|
Deferred tax liabilities: | | | | |
Core deposit intangible from acquired companies | | 664 |
| | 1,366 |
|
Undistributed income from subsidiary not consolidated for tax return purposes (REIT) | | 12,015 |
| | 924 |
|
Deferred loan costs | | 1,169 |
| | 1,545 |
|
Prepaid expenses | | 524 |
| | 641 |
|
Deferred gain on securities | | 116 |
| | 194 |
|
Unfunded pension benefits | | 7 |
| | 18 |
|
Unrealized gains on hedging derivative | | 229 |
| | 361 |
|
Other | | 357 |
| | 841 |
|
Gross deferred tax liabilities | | 15,081 |
| | 5,890 |
|
Net deferred tax assets | | $ | 2,857 |
| | $ | 17,910 |
|
In 2016, the Company recorded net deferred tax assets (liabilities) of $4.4 million and ($164,000) as a result of the acquisitions of Pascack and Harmony, respectively.
The Company evaluates the realizability of its deferred tax assets by examining its earnings history and projected future earnings and by assessing whether it is more likely than not that carryforwards would not be realized. Based upon the majority of the Company’s deferred tax assets having no expiration date, the Company’s earnings history, and the projections of future earnings, the Company’s management believes that it is more likely than not that all of the Company’s deferred tax assets as of December 31, 2017 will be realized.
The Company evaluates tax positions that may be uncertain using a recognition threshold of more likely than not, and a measurement attribute for all tax positions taken or expected to be taken on a tax return, in order for those tax positions to be recognized in the financial statements. The Company had no unrecognized tax benefits or related interest or penalties at December 31, 2017 or 2016.
The Company is subject to U.S. federal income tax law as well as income tax of various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few significant exceptions, the Company is no longer subject to U.S. federal examinations by tax authorities for the years before 2015 or to state and local examinations by tax authorities for the years before 2014.