Note 15. Income Taxes
The components of income taxes consist of (dollars in thousands):
|
|
|
Years Ended December 31, |
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|
|
2017 |
|
2016 |
|
2015 |
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|
Current |
|
$ |
31,285 |
|
$ |
16,271 |
|
$ |
17,839 |
|
|
Deferred |
|
14,100 |
|
10,452 |
|
2,857 |
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Total income tax expense |
|
$ |
45,385 |
|
$ |
26,723 |
|
$ |
20,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of federal and state income taxes at statutory rates to the income taxes included in the statements of income is as follows:
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|
Years Ended December 31, |
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|
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
|
% of |
|
% of |
|
% of |
|
|
|
|
Pretax |
|
Pretax |
|
Pretax |
|
|
|
|
Income |
|
Income |
|
Loss |
|
|
Income tax at statutory rate |
|
35.0 |
% |
35.0 |
% |
35.0 |
% |
|
Effect of: |
|
|
|
|
|
|
|
|
TCJA |
|
7.5 |
% |
— |
% |
— |
% |
|
Tax-exempt interest, net |
|
(2.1 |
)% |
(2.4 |
)% |
(2.3 |
)% |
|
Stock incentive |
|
(0.5 |
)% |
— |
% |
— |
% |
|
State income taxes, net |
|
4.0 |
% |
4.3 |
% |
4.2 |
% |
|
Income on bank owned life insurance |
|
(0.9 |
)% |
(1.0 |
)% |
(1.2 |
)% |
|
Other, net |
|
(1.0 |
)% |
(0.9 |
)% |
(1.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
42.0 |
% |
35.0 |
% |
34.7 |
% |
|
|
|
|
|
|
|
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|
On December 22, 2017, the President signed into law the TCJA which, effective January 2018, reduced the corporate tax rate as well as adjusted tax rates, deductions and exemptions for individuals and businesses alike. The Company took a one-time, non-cash charge of $8.1 million in the fourth quarter of 2017 as a result of the revaluation of the Company’s net deferred tax position following the enactment of the TCJA.
Net deferred taxes at December 31, 2017 and 2016 in the accompanying Consolidated Balance Sheets, include the following amounts of deferred tax assets and liabilities (dollars in thousands). Net deferred taxes at December 31, 2017 were impacted by the First Community and Mid Illinois acquisitions and enactment of the TCJA.
|
|
|
2017 |
|
2016 |
|
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|
Deferred tax assets: |
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|
|
|
|
||
|
Investment securities: |
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|
Unrealized losses on securities available for sale |
|
$ |
1,362 |
|
$ |
— |
|
|
Other, net |
|
923 |
|
— |
|
||
|
Allowance for loan losses |
|
15,751 |
|
19,988 |
|
||
|
Stock-based compensation |
|
1,869 |
|
2,396 |
|
||
|
Deferred compensation |
|
2,455 |
|
2,748 |
|
||
|
Affordable housing partnerships and other investments |
|
970 |
|
929 |
|
||
|
Purchase accounting adjustments |
|
7,712 |
|
7,186 |
|
||
|
Accrued vacation |
|
604 |
|
729 |
|
||
|
Employee costs |
|
759 |
|
2,044 |
|
||
|
Other |
|
413 |
|
1,097 |
|
||
|
|
|
|
|
|
|
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|
|
|
$ |
32,818 |
|
$ |
37,117 |
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
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|
|
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|
Investment securities: |
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|
|
|
||
|
Unrealized gains on securities available for sale |
|
$ |
— |
|
$ |
(24 |
) |
|
Other, net |
|
— |
|
(639 |
) |
||
|
Basis in premises and equipment |
|
(1,909 |
) |
(1,468 |
) |
||
|
Affordable housing partnerships and other investments |
|
(1,769 |
) |
(2,110 |
) |
||
|
Purchase accounting adjustments |
|
(1,262 |
) |
(2,242 |
) |
||
|
Mortgage servicing assets |
|
(1,120 |
) |
(1,228 |
) |
||
|
Basis in core deposit and customer intangible assets |
|
(10,955 |
) |
(7,377 |
) |
||
|
Deferred loan origination costs |
|
(1,168 |
) |
(2,765 |
) |
||
|
|
|
|
|
|
|
||
|
|
|
$ |
(18,183 |
) |
$ |
(17,853 |
) |
|
|
|
|
|
|
|
|
|
|
Net operating loss carryforward, net of valuation allowance |
|
2,661 |
|
960 |
|
||
|
|
|
|
|
|
|
||
|
Net deferred tax assets |
|
$ |
17,296 |
|
$ |
20,224 |
|
|
|
|
|
|
|
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|
At December 31, 2017, the Company had a federal net operating loss carryforward of $2.7 million, or approximately $12.7 million pre-tax, in relation to the First Community acquisition, which is subject to limitations under Section 382 of the Internal Revenue Code. At December 31, 2016, the Company had an Illinois net operating loss carryforward of $1.0 million, or approximately $13.0 million pre-tax, which was utilized in 2017.
At December 31, 2017, the Company also had a Florida net operating loss carryforward of $0.1 million, which will begin to expire in 2030. Due to the uncertainty as to whether the Company will be able to fully realize the Florida carryforward, the Company has a full valuation allowance of $0.1 million related to this net operating loss carryforward. At December 31, 2016, the Company had a Florida net operating loss carryforward of $0.3 million with a full valuation allowance.
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 additional valuation allowance is required for any other deferred tax assets as of December 31, 2017 and 2016.