Income Taxes

The following table presents the components of income tax provision included in the Consolidated Statements of Income for the years ended December 31:



(in thousands)	Current		Deferred		Total
YEAR ENDED DECEMBER 31, 2015:
Federal	$	22,914	$	81,267	$	104,181
State	1,708		18,699		20,407
	$	24,622	$	99,966	$	124,588
YEAR ENDED DECEMBER 31, 2014:
Federal	$	1,968	$	70,583	$	72,551
State	1,045		9,444		10,489
	$	3,013	$	80,027	$	83,040
YEAR ENDED DECEMBER 31, 2013:
Federal	$	37,960	$	7,722	$	45,682
State	8,187		323		8,510
	$	46,147	$	8,045	$	54,192

The following table presents a reconciliation of income taxes computed at the Federal statutory rate to the actual effective rate for the years ended December 31:



	2015		2014		2013
Statutory Federal income tax rate	35.0	%	35.0	%	35.0	%
State tax, net of Federal income tax	4.0	%	3.5	%	4.4	%
Tax-exempt income	(1.8	)%	(2.5	)%	(3.2	)%
Tax credits	(0.1	)%	(0.8	)%	(1.8	)%
Nondeductible merger expenses	—	%	1.2	%	1.0	%
BOLI	(1.1	)%	(1.6	)%	(0.8	)%
Other	(0.1	)%	1.2	%	1.0	%
Effective income tax rate	35.9	%	36.0	%	35.6	%

The following table reflects the effects of temporary differences that give rise to the components of the net deferred tax assets recorded on the consolidated balance sheets as of December 31:



(in thousands)	2015			2014
DEFERRED TAX ASSETS:
Net operating loss carryforwards	$	137,302		$	197,227
Allowance for loan and lease losses	54,048			41,133
Loan discount	40,068			90,287
Accrued severance and deferred compensation	28,893			28,216
Tax credits	15,778			21,966
Other	32,350			44,493
Total gross deferred tax assets	308,439			423,322

DEFERRED TAX LIABILITIES:
Residential mortgage servicing rights	54,112			48,496
Fair market value adjustment on preferred securities	48,407			50,549
Intangibles	17,417			15,074
Other	49,331			75,395
Total gross deferred tax liabilities	169,267			189,514

Valuation allowance	(1,090		)	(3,366		)

Net deferred tax assets	$	138,082		$	230,442

The Company acquired a $276.8 million net deferred tax asset before acquisition accounting adjustments in the Merger, including $238.4 million of federal and state NOL and tax credit carry-forwards. The Merger triggered an "ownership change" as defined in Section 382 of the Internal Revenue Service Code ("Section 382"). As a result of being subject to Section 382, the Company will be limited in the amount of NOL carry-forwards that can be used annually to offset future taxable income. The Company believes it is more likely than not that it will be able to fully realize the benefit of its federal NOL carry-forwards. The Company also believes that it is more likely than not that the benefit from certain state NOL and tax credit carry-forwards will not be realized and therefore has provided a valuation allowance of $1.1 million as of December 31, 2015 and $3.4 million as of December 31, 2014 on the deferred tax assets relating to these state NOL and tax credit carry-forwards. The Company has determined that no other valuation allowance for the remaining deferred tax assets is required as management believes it is more likely than not that the remaining gross deferred tax assets of $307.3 million and $420.0 million at December 31, 2015 and 2014, respectively, will be realized principally through future reversals of existing taxable temporary differences. Management further believes that future taxable income will be sufficient to realize the benefits of temporary deductible differences that cannot be realized through carry-back to prior years or through the reversal of future temporary taxable differences.

The tax credits consist of state tax credits of $6.6 million and $8.9 million at December 31, 2015 and 2014, respectively, and federal low income housing and alternative minimum tax credits of $9.1 million and $13.0 million at December 31, 2015 and 2014, respectively. The state tax credits will be utilized to offset future state income taxes. Most of the state tax credits benefit a five-year period, with an eight-year carry-forward allowed. Federal low income housing credits have a twenty-year carry forward and the alternative minimum tax credits may be carried forward indefinitely.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, as well as the majority of states and Canada. The Company is no longer subject to U.S. federal tax examinations for years before 2012, and no longer subject to other state tax authorities examinations for years before 2011, except in California, for years before 2005, and for Canadian tax authority examinations for years before 2012.

The Company periodically reviews its income tax positions based on tax laws and regulations and financial reporting considerations, and records adjustments as appropriate. This review takes into consideration the status of current taxing authorities' examinations of the Company's tax returns, recent positions taken by the taxing authorities on similar transactions, if any, and the overall tax environment.

The Company had gross unrecognized tax benefits in the amounts of $2.9 million and $2.7 million recorded as of December 31, 2015 and 2014, respectively. If recognized, the unrecognized tax benefit would reduce the 2015 annual effective tax rate by 1%. The Company accrued $29,000 and $206,000 of interest related to unrecognized tax benefits during 2015 and 2014, respectively. Interest on unrecognized tax benefits is reported by the Company as a component of tax expense. As of December 31, 2015 and 2014, the accrued interest related to unrecognized tax benefits is $428,000 and $399,000, respectively.

Detailed below is a reconciliation of the Company's unrecognized tax benefits, gross of any related tax benefits, for the years ended December 31, 2015 and 2014, respectively:



(in thousands)	2015			2014
Balance, beginning of period	$	2,671		$	602
Effectively settled positions	—			(86		)
Changes for tax positions of current year	178			146
Changes for tax positions of prior years/assumed in merger	574			2,009
Lapse of statute of limitations	(535		)	—
Balance, end of period	$	2,888		$	2,671