Note 14 – Income Taxes

The income tax provision included in the consolidated statements of income was as follows for the periods presented ($ in thousands):

	Years Ended December 31,
Current	2016		2015		2014
Federal	$	10,355	$	18,448	$	17,761
State		2,698		2,166		2,068
Deferred
Federal		15,647		12,865		16,256
State		2,353		1,935		2,444
Income tax provision	$	31,053	$	35,414	$	38,529

For the periods presented, the income tax provision differs from the amount computed by applying the statutory federal income tax rate of 35% to income before income taxes as a result of the following ($ in thousands):

	Years Ended December 31,
	2016			2015			2014
Income tax computed at statutory tax rate	$	48,812		$	53,008		$	56,732
Tax exempt interest		(6,780	)		(5,908	)		(5,612	)
Nondeductible interest expense		201			119			107
State income taxes, net		1,754			1,408			2,933
Income tax credits		(16,183	)		(15,283	)		(15,212	)
Other		3,249			2,070			(419	)
Income tax provision	$	31,053		$	35,414		$	38,529

Temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities gave rise to the following net deferred tax assets at December 31, 2016 and 2015, which are included in other assets ($ in thousands):

	December 31,
	2016			2015
Deferred tax assets:
Loan purchase accounting	$	9,341		$	26,049
Other real estate		25,750			32,664
Allowance for loan losses		31,618			30,451
Deferred compensation		21,893			21,102
Realized built in losses		18,699			16,215
Securities		9,256			13,016
Pension and other postretirement benefit plans		15,545			14,433
Nonaccrual loans		2,093			3,137
Unrealized losses on securities available for sale		3,629			-
Stock-based compensation		3,031			3,137
Other		13,731			15,820
Gross deferred tax asset		154,586			176,024
Valuation allowance		(8,650	)		(8,650	)
Deferred tax asset net of valuation allowance		145,936			167,374

Deferred tax liabilities:
Goodwill and other identifiable intangibles		25,666			26,651
Premises and equipment		19,391			21,257
Unrealized gains on securities available for sale		—			2,241
Mortgage servicing rights		12,159			9,924
Securities		1,697			1,474
Leases		60			106
Other		6,891			4,764
Gross deferred tax liability		65,864			66,417
Net deferred tax asset	$	80,072		$	100,957

Trustmark has evaluated the need for a valuation allowance and, based on the weight of the available evidence, has determined that it is more likely than not that a portion of deferred tax assets will not be realized due to limitations on the deductibility of built in losses in future years. A valuation allowance, which was created as a result of the BancTrust merger in 2013 and reduced in 2014 as a result of measurement period adjustments, has been established to reduce deferred tax assets to the amount that will more likely than not be realized in future years.

The following table provides a summary of the changes during the 2016 calendar year in the amount of unrecognized tax benefits that are included in other liabilities in the consolidated balance sheet ($ in thousands):

Balance at January 1, 2016	$	1,720
Increases due to tax positions taken during the current year		1,047
Decreases due to tax positions taken during a prior year		(592	)
Decreases due to the lapse of applicable statute of limitations during the current year		(441	)
Decreases due to settlements with taxing authorities during the current year		—
Balance at December 31, 2016	$	1,734

Accrued interest, net of federal benefit, at December 31, 2016	$	174

Unrecognized tax benefits that would impact the effective tax rate, if recognized, at December 31, 2016	$	1,426

Interest and penalties related to unrecognized tax benefits, if any, are recorded in income tax expense. With limited exception, Trustmark is no longer subject to U.S. federal, state and local audits by tax authorities for 2010 and earlier tax years. Trustmark does not anticipate a significant change to the total amount of unrecognized tax benefits within the next twelve months.