The components of income tax expense are as follows:

 

		Year Ended December 31,
		2018				2017				2016
		(In Thousands)
Current tax expense:
Federal		$	43,207			$	27,952			$	29,813
State			2,950				2,258				1,254
Total current tax expense			46,157				30,210				31,067
Deferred tax (benefit) expense:
Federal			(12,636	)			17,073				(662	)
State			(1,619	)			(3,025	)			(1,066	)
Total deferred tax (benefit) expense			(14,255	)			14,048				(1,728	)
Total income tax expense		$	31,902			$	44,258			$	29,339

 

The Company’s total income tax expense differs from the amounts computed by applying the Federal income tax statutory rates to income before income taxes. A reconciliation of the differences is as follows:

 

		Year Ended December 31, 2018
		Amount				% of Pre-tax Earnings
		(In Thousands)
Income tax at statutory federal rate		$	35,457				21.00	%
Effect on rate of:
State income tax, net of federal tax effect			808				0.48	%
Tax-exempt income, net of expenses			(655	)			(0.39	)%
Bank owned life insurance contracts			(657	)			(0.39	)%
Excess tax benefit from stock compensation			(3,118	)			(1.84	)%
Federal tax credits			(113	)			(0.07	)%
Other			180				0.10	%
Effective income tax and rate		$	31,902				18.89	%

 

		Year Ended December 31, 2017
		Amount				% of Pre-tax Earnings
		(In Thousands)
Income tax at statutory federal rate		$	48,073				35.00	%
Effect on rate of:
State income tax, net of federal tax effect			43				0.03	%
Tax-exempt income, net of expenses			(1,356	)			(0.99	)%
Bank owned life insurance contracts			(1,096	)			(0.80	)%
Excess tax benefit from stock compensation			(4,278	)			(3.11	)%
Federal tax credits			(234	)			(0.17	)%
Enacted tax rate change			3,108				2.26
Other			(2	)			-	%
Effective income tax and rate		$	44,258				32.22	%

 

		Year Ended December 31, 2016
		Amount				% of Pre-tax Earnings
		(In Thousands)
Income tax at statutory federal rate		$	38,786				35.00	%
Effect on rate of:
State income tax, net of federal tax effect			254				0.23	%
Tax-exempt income, net of expenses			(1,322	)			(1.20	)%
Bank owned life insurance contracts			(978	)			(0.88	)%
Incentive stock option expense			(4,788	)			(4.32	)%
Federal tax credits			(2,652	)			(2.40	)%
Other			39				0.04	%
Effective income tax and rate		$	29,339				26.47	%

 

The components of net deferred tax asset are as follows:

 

		December 31,
		2018				2017
		(In Thousands)
Deferred tax assets:
Allowance for loan losses		$	17,212			$	14,905
Other real estate owned			317				232
Nonqualified equity awards			788				927
Nonaccrual interest			311				178
State tax credits			6,791				5,688
Investments			1,130				1,296
Deferred loan fees			804				866
Reserve for unfunded commitments			135				125
Accrued bonus			2,025				1,521
Differences in amounts reflected in financial statements and income tax basis of assets acquired and liabilities assumed in acquisition			139				175
Net unrealized loss on securities available for sale			1,273				65
Other deferred tax assets			669				431
Total deferred tax assets			31,594				26,409
Deferred tax liabilities:
REIT dividend			-				9,706
Depreciation			3,732				3,240
Prepaid expenses			376				164
Acquired intangible assets			209				277
Total deferred tax liabilities			4,317				13,387
Net deferred tax assets		$	27,277			$	13,022

 

The Company believes its net deferred tax asset is recoverable as of based on the expectation of future taxable income and other relevant considerations.

 

Pursuant to ASC --- , deferred tax assets and liabilities are measured using enacted tax rates applicable to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  On the President of the United States signed the “Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year (referred to as the “Tax Cuts and Jobs Act” or the Act).  The Act provided for a reduction in the corporate tax rate from a maximum tax rate of to a flat tax rate of effective for tax years beginning after As a result, the Company revalued its deferred tax assets and liabilities as of and recorded the effect of this change as a component of tax expense.  Tax expense recorded related to the change in the enacted federal tax rate was in

 

The Company and its subsidiaries file a consolidated U.S. Federal income tax return and various consolidated and separate company state income tax returns. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended through The Company is also currently open to audit by several state departments of revenue for the years ended through The audit periods differ depending on the date the Company began business activities in each state. Currently, there are years for which the Company filed a federal or state income tax return that are under examination by the IRS or any state department of revenue.

 

Accrued interest and penalties on unrecognized income tax benefits totaled and as of and respectively. Unrecognized income tax benefits as of and that, if recognized, would impact the effective income tax rate totaled and (net of the federal benefit on state income tax issues), respectively. The Company does expect any of the uncertain tax positions to be settled or resolved during the next months.

 

The following table presents a summary of the changes during and in the amount of unrecognized tax benefits that are included in the consolidated balance sheets.

 

		2018				2017				2016
		(In Thousands)
Balance, beginning of year		$	1,779			$	1,375			$	1,173
Increases related to prior year tax positions			799				365				364
Decreases related to prior year tax positions			-				-				-
Increases related to current year tax positions			-				-				-
Settlements			-				-				-
Enacted tax rate change			-				315				-
Lapse of statute			(445	)			(276	)			(162	)
Balance, end of year		$	2,133			$	1,779			$	1,375