Atlantic Union Bankshares Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

INCOME TAXES

12 Months Ended

Dec. 31, 2020

17. INCOME TAXES

The Company files income tax returns in the U.S., the Commonwealth of Virginia, and other states. With few exceptions, the Company is no longer subject to U.S. federal or state income tax examinations by tax authorities for years prior to 2017.

Net deferred tax assets and liabilities consist of the following components as of December 31, 2020 and 2019 (dollars in thousands):


	2020		2019
Deferred tax assets:
Credit losses	$	48,505	$	18,938
Benefit plans		3,332		3,507
Acquisition accounting		10,038		16,021
Lease right-of-use asset		14,893		13,507
Stock grants		2,305		2,032
OREO		2,971		3,295
Securities available for sale		1,017		1,169
Net operating losses		47,463		55,023
Nonaccrual loans		2,011		3,243
Other		7,287		4,227
Total deferred tax assets	$	139,822	$	120,962
Deferred tax liabilities:
Acquisition accounting	$	16,271	$	19,815
Lease right-of-use liability		12,012		11,191
Premises and equipment		19,066		6,696
Securities available for sale		19,714		10,069
Other		674		511
Total deferred tax liabilities		67,737		48,282
Net deferred tax asset	$	72,085	$	72,680

At December 31, 2020, the Company had federal net operating loss carryforwards of approximately $165.2 million, of which approximately $144.4 million under pre-2018 law can be carried forward 20 years, and $20.8 million that can be carried forward indefinitely. The Company also had state net operating loss carryforwards of approximately $334.1 million, of which approximately $226.1 million will begin to expire after 2026, and $108 million that can be carried forward indefinitely. In assessing the ability to realize deferred tax assets, management considers the scheduled reversal of temporary differences, projected future taxable income, and tax planning strategies in accordance with ASC 740-10-30. Based on its latest analysis, at December 31, 2020, management concluded that it is more likely than not that the Company would be able to fully realize its deferred tax asset related to net operating losses generated at the federal and state level. A significant portion of the net operating losses were obtained in the acquisition of Xenith at the beginning of 2018.

The Company has analyzed the tax positions taken or expected to be taken in its tax returns and concluded it has no liability related to uncertain tax positions in accordance with applicable ASC 740, Accounting for Uncertainty in Income Taxes, regulations.

The provision for income taxes charged to continuing operations for the years ended December 31, 2020, 2019, and 2018 consists of the following (dollars in thousands):


	2020		2019		2018
Current tax expense	$	25,376	$	22,500	$	12,114
Deferred tax expense		2,690		15,057		17,902
Income tax expense	$	28,066	$	37,557	$	30,016

The income tax expense differs from the amount of income tax determined by applying the U.S. federal income tax rate to pre-tax income for the years ended December 31, 2020, 2019, and 2018, due to the following (dollars in thousands):


	2020		2019		2018
Computed "expected" tax expense	$	39,122	$	48,564	$	37,680
(Decrease) in taxes resulting from:
Tax-exempt interest income, net		(8,844)		(8,259)		(5,188)
State income tax benefit		(310)		(1,078)		(1,133)
Other tax exempt income, net		(1,902)		(1,670)		(1,343)
Income tax expense	$	28,066	$	37,557	$	30,016

The effective tax rates were 15.1%, 16.2% and 16.7% for years ended December 31, 2020, 2019, and 2018, respectively. Tax credits totaled approximately $3.0 million, $2.9 million and $1.1 million for the years ended December 31, 2020, 2019, and 2018, respectively.

- 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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