12. INCOME TAXES

Income tax expense consists of the following:


	For the Year Ended December 31,
	2014		2013			2012
	(Dollars in thousands)
Current provision:
Federal	$	38,957	$	38,881		$	35,089
State		15,968		13,996			15,910

		54,925		52,877			50,999

Deferred provision (benefit):
Federal		2,534		(3,260	)		(10,102	)
State		1,317		(950	)		(3,484	)

		3,851		(4,210	)		(13,586	)

Total	$	58,776	$	48,667		$	37,413

Income tax asset consists of the following:


	As of December 31,
	2014		2013
	(Dollars in thousands)
Current:
Federal	$	4,522	$	2,838
State		4,437		1,337

		8,959		4,175

Deferred:
Federal		18,304		42,545
State		4,198		13,066

		22,502		55,611

Total	$	31,461	$	59,786

The components of the net deferred tax asset are as follows:


	As of December 31,
	2014		2013
	(Dollars in thousands)
Federal
Deferred tax assets:
Bad debt and credit loss deduction	$	23,805	$	29,700
Net operating loss carryforward		672		781
Deferred compensation		3,300		3,024
Other intangibles		5		8
PCI loans		23,667		26,360
California franchise tax		3,461		1,629
Unrealized loss on investment securities, net		—		5,012
Other, net		6,140		4,907

Gross deferred tax asset		61,050		71,421

Deferred tax liabilities:
Depreciation		4,019		5,489
Intangibles — acquistions		1,858		2,024
FDIC indemnification asset		13,831		14,269
FHLB stock		3,913		4,388
Deferred income		2,430		2,706
Unrealized gain on investment securities, net		16,695		—

Gross deferred tax liability		42,746		28,876

Net deferred tax asset — federal	$	18,304	$	42,545

State
Deferred tax assets:
Bad debt and credit loss deduction	$	6,014	$	8,226
Net operating loss carryforward		34		34
Deferred compensation		1,030		942
Other intangibles		668		620
FDIC indemnification asset		6,498		6,363
Unrealized loss on investment securities, net		—		1,744
Other, net		1,911		1,554

Gross deferred tax asset		16,155		19,483

Deferred tax liabilities:
Depreciation		589		1,058
PCI loans		4,389		3,935
FHLB stock		797		945
Deferred income		374		479
Unrealized gain on investment securities, net		5,808		—

Gross deferred tax liability		11,957		6,417

Net deferred tax asset — state	$	4,198	$	13,066

A reconciliation of the statutory income tax rate to the consolidated effective income tax rate follows:


	For the Year Ended December 31,
	2014						2013						2012
	Amount			Percent			Amount			Percent			Amount			Percent
	(Dollars in thousands)
Federal income tax at statutory rate	$	56,979			35.0	%	$	50,496			35.0	%	$	40,143			35.0	%
State franchise taxes, net of federal benefit		11,233			6.9	%		8,734			6.1	%		8,081			7.0	%
Tax-exempt income		(8,622	)		(5.3	%)		(10,189	)		(7.1	%)		(10,654	)		(9.3	%)
Tax credits		(1,014	)		(0.6	%)		(940	)		(0.7	%)		(1,279	)		(1.1	%)
Other, net		200			0.1	%		566			0.4	%		1,122			1.0	%

Provision for income taxes	$	58,776			36.1	%	$	48,667			33.7	%	$	37,413			32.6	%

The change in unrecognized tax benefits in 2014 and 2013 follows:


	For the Year Ended December 31,
	2014		2013
	( Dollars in thousands )
Balance, beginning of period	$	3,016	$	889
Additions for tax positions related to prior years		—		1,603
Reductions due to lapse of statue of limitations		—		524

Balance, end of period	$	3,016	$	3,016

The total amount of unrecognized tax benefits at December 31, 2014, of $3.0 million would, if recognized, affect the effective tax rate. The amount accrued for payment of interest as of December 31, 2013 was $196,000. The Company records interest and penalties related to uncertain tax positions as part of other operating expense. We do not expect the total amount of unrecognized tax benefits to significantly increase or decrease within the next twelve months.

The Company is subject to federal income tax and franchise tax of the state of California. Our federal income tax returns for the years ended December 31, 2008 through 2014 are open to audit by the federal authorities and our California state tax returns for the years ended December 31, 2006 through 2014 are open to audit by state authorities.