STATE BANK FINANCIAL CORP

NOTE 21: INCOME TAXES

The components of income tax expense were as follows (dollars in thousands):



	Years Ended December 31
	2017		2016		2015
Current tax provision:
Federal	$	27,484	$	12,599	$	35,151
State	2,926		540		5,126
Total current tax provision	30,410		13,139		40,277
Deferred tax provision:
Federal	10,010		10,958		(20,831		)
State	622		2,087		(3,997		)
Total deferred tax provision	10,632		13,045		(24,828		)
Total income tax provision	$	41,042	$	26,184	$	15,449

Income tax expense differed from amounts computed by applying the Federal statutory rate of 35% to income before income taxes due to the following factors (dollars in thousands):



	Years Ended December 31
	2017			2016			2015
Federal taxes at statutory rate	$	30,666		$	25,821		$	15,355
Increase (reduction) in income taxes resulting from:
State taxes, net of federal benefit	2,306			1,708			734
Tax-exempt interest	(361		)	(355		)	(357		)
Bank-owned life insurance income	(680		)	(675		)	(674		)
Tax rate change - Tax Cuts and Jobs Act of 2017	8,106			—			—
Merger election	2,545			—			—
Stock based compensation	(904		)	(255		)	—
Other	(636		)	(60		)	391
Income tax expense	$	41,042		$	26,184		$	15,449

On December 22, 2017, the Tax Cuts and Jobs Act was enacted. Among other things, the new law establishes a new, flat corporate federal statutory income tax rate of 21% effective January 1, 2018. At the enactment date, the Company revalued its deferred tax assets and liabilities based upon the newly enacted statutory rate of 21%, which is the rate at which these assets and liabilities are expected to reverse, and recognized provisional tax expense of $8.1 million. The ultimate impact of the Tax Cuts and Jobs Act may differ from this provisional amount due to changes in management's interpretations and assumptions, as well as additional regulatory guidance that may be issued. The provisional amount is expected to be finalized when the 2017 federal tax return is filed in 2018. The Company elected to treat its acquisition of AloStar as an acquisition of assets rather than an acquisition of stock for tax purposes. This election resulted in tax expense of $2.5 million to remeasure the deferred tax assets and liabilities related to the acquisition.

The components of the net deferred tax asset included in other assets in the accompanying consolidated statement of financial condition are as follows (dollars in thousands):



	December 31
	2017			2016
Deferred tax assets
Allowance for loan and lease losses	$	7,274		$	10,288
Net operating losses and credit carryforward	4,125			6,649
Accrued compensation	4,046			5,585
Tax basis difference on acquired assets	2,864			6,407
Other real estate owned	128			497
Unrealized losses on cash flow hedges	22			682
Estimated loss on acquired failed bank assets	2,646			6,327
Unrealized losses on securities available-for-sale	843			834
Other	1,125			538
Total deferred tax assets	23,073			37,807

Deferred tax liabilities
Intangible asset basis difference	$	(4,427	)	$	(7,163	)
Premises and equipment	(1,598		)	(2,406		)
Other	(1,472		)	(989		)
Total deferred tax liabilities	(7,497		)	(10,558		)

Net Deferred Tax Asset	$	15,576		$	27,249

Based on management’s belief that it is more likely than not that all net deferred tax asset benefits will be realized, there was no valuation allowance at either December 31, 2017 or 2016. At December 31, 2017 and 2016, the Company had Federal and State tax net operating loss carryforwards, related to the Bank of Atlanta and S Bank acquisitions, of approximately $16.3 million and $17.2 million, respectively. The loss carryforwards can be deducted annually from future taxable income through 2036, subject to an annual limitation of approximately $1.0 million. Currently, tax years 2014 to present are open for examination by Federal and State taxing authorities.