INCOME TAXES

The following table presents income tax expense and the effective income tax rate for the quarters and nine months ended September 30, 2014 and 2013.

Income Tax Expense

(Dollar amounts in thousands)



	Quarters Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Income before income tax expense	$	27,098		$	54,282		$	80,076		$	99,348
Income tax expense:
Federal income tax expense	$	6,714		$	19,145		$	19,719		$	29,058
State income tax expense	1,835			5,814			5,644			10,149
Total income tax expense	$	8,549		$	24,959		$	25,363		$	39,207
Effective income tax rate	31.5		%	46.0		%	31.7		%	39.5		%

Federal income tax expense and the effective income tax rate are influenced by the amount of tax-exempt income derived from investment securities and BOLI in relation to pre-tax income and state income taxes. State income tax expense and the related effective tax rate are driven by the amount of state tax-exempt income in relation to pre-tax income and state tax rules for consolidated/combined reporting and sourcing of income and expense.

Effective tax rates were elevated for the quarter and nine months ended September 30, 2013 due to a $34.0 million gain recognized on the sale of an equity investment and a $7.8 million gain on the termination of two FHLB forward commitments, which were taxed at statutory rates, and a $13.3 million non-deductible BOLI modification loss. Excluding these transactions, the effective tax rate for the quarter and nine months ended September 30, 2013 would have been 30.5% and 31.2%, respectively. In addition, an increase in income exempt from state taxes contributed to the decrease in the effective income tax rate compared to both prior periods.

The Company's accounting policies for the recognition of income taxes in the Consolidated Statements of Financial Condition and Income are included in Notes 1 and 14 to the Consolidated Financial Statements of the Company's 2013 10-K.