7.	INCOME TAXES:

The Company files a consolidated federal income tax return. Income tax expense is comprised of the following:


	Year Ended December 31,
	2012		2011		2010
Current federal income tax	$	23,605	$	21,727	$	19,625
Current state income tax		13		84		51
Deferred federal income tax expense (benefit)		1,517		2,005		1,089


Income tax expense	$	25,135	$	23,816	$	20,765

Income tax expense, as a percentage of pretax earnings, differs from the statutory federal income tax rate as follows:


	As a Percent of Pretax Earnings
	2012			2011			2010
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%
Reductions in tax rate resulting from interest income exempt from federal income tax		(9.7	)		(9.3	)		(9.2	)
Effect of state income tax		0.1			0.1			0.1
ESOP tax credit		(0.3	)		(0.3	)		(0.3	)
Other		0.2			0.3			0.2

Effective income tax rate		25.3	%		25.8	%		25.8	%

The approximate effects of each type of difference that gave rise to the Company’s deferred tax assets and liabilities at December 31, 2012 and 2011 are as follows:


	2012			2011
Deferred tax assets:
Tax basis of loans in excess of financial statement basis	$	12,534		$	12,231
Minimum liability in defined benefit plan		4,502			3,954
Recognized for financial reporting purposes but not for tax purposes:
Deferred compensation		2,002			1,807
Write-downs and adjustments to other real estate owned and repossessed assets		148			538
Other deferred tax assets		255			306


Total deferred tax assets		19,441			18,836


Deferred tax liabilities:
Financial statement basis of fixed assets in excess of tax basis		5,678			5,204
Intangible asset amortization deductible for tax purposes, but not for financial reporting purposes		8,992			7,761
Recognized for financial reporting purposes but not for tax purposes:
Accretion on investment securities		1,563			2,129
Pension plan contributions		2,147			1,668
Net unrealized gain on investment securities Available-for-sale		32,130			29,383
Other deferred tax liabilities		389			433


Total deferred tax liabilities		50,899			46,578


Net deferred tax asset (liability)	$	(31,458	)	$	(27,742	)

Current authoritative accounting guidance prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of cumulative benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. Current authoritative accounting guidance also provides guidance on the accounting for and disclosure of unrecognized tax benefits, interest and penalties. The Company concluded the tax benefits of positions taken and expected to be taken on its tax returns should be recognized in the financial statements under this guidance. The Company files income tax returns in the U.S. federal jurisdiction and several U.S. state jurisdictions. We are no longer subject to U.S. federal income tax examinations by tax authorities for years before 2009 or Texas state tax examinations by tax authorities for years before 2011.