14. Income Taxes

The components of the provision for income taxes, exclusive of tax effect of unrealized securities gains and losses, are as follows:

(in thousands)	2015		2014			2013
Current income tax expense	$	18,416	$	20,194		$	19,418
Deferred income tax expense (benefit)		115		(1,048	)		582
Total income tax expense	$	18,531	$	19,146		$	20,000

A reconciliation of income tax expense at the statutory rate to our actual income tax expense is shown below:

(in thousands)	2015					2014					2013
Computed at the statutory rate	$	22,737		35.00	%	$	21,839		35.00	%	$	22,810		35.00	%
Adjustments resulting from:
Tax-exempt interest		(1,275	)	(1.96	)		(1,204	)	(1.93	)		(1,126	)	(1.73	)
Housing and new markets credits		(2,692	)	(4.14	)		(1,076	)	(1.72	)		(996	)	(1.52	)
Dividends received deduction		(128	)	(0.20	)		(178	)	(0.29	)		(291	)	(0.45	)
Bank owned life insurance		(549	)	(0.84	)		(503	)	(0.81	)		(791	)	(1.22	)
ESOP dividend deduction		(298	)	(0.46	)		(284	)	(0.46	)		(281	)	(0.43	)
Other, net		736		1.13			552		0.88			675		1.04
Total	$	18,531		28.53	%	$	19,146		30.68	%	$	20,000		30.69	%

The components of the net deferred tax liability as of December 31 are as follows:

(in thousands)	2015			2014
Deferred tax assets:
Allowance for loan and lease losses	$	12,633		$	12,019
Interest on nonperforming loans		806			1,039
Accrued expenses		2,087			1,911
Allowance for other real estate owned		2,185			1,901
Other		665			1,145
Total deferred tax assets		18,376			18,015

Deferred tax liabilities:
Depreciation and amortization		(20,150	)		(19,181	)
FHLB stock dividends		(3,460	)		(3,460	)
Loan fee income		(552	)		(744	)
Mortgage servicing rights		(1,133	)		(1,039	)
Capitalized lease obligations		(211	)		(681	)
Unrealized gains on AFS securities		(544	)		(1,231	)
Limited partnership investments		(650	)		(395	)
Other		(596	)		(776	)
Total deferred tax liabilities		(27,296	)		(27,507	)

Net deferred tax liability	$	(8,920	)	$	(9,492	)

CTBI accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. CTBI determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Uncertain tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management's judgment.

In 2015, CTBI was subject to an examination by the IRS for the tax year 2013. In November of 2015, CTBI was notified that the examination was being concluded with no proposed changes to our 2013 corporate income tax return. With a few exceptions, CTBI is no longer subject to U.S. federal tax examinations by tax authorities for years before 2012, and state and local income tax examinations by tax authorities for years before 2011. For federal tax purposes, CTBI recognizes interest and penalties on income taxes as a component of income tax expense.

CTBI files consolidated income tax returns with its subsidiaries.