INCOME TAX

The reconciliation between the statutory and actual income tax expense (benefit) is summarized in the following table for the years indicated:



	2015			2014			2013
Income Tax Expense for the Year Ended December 31:
Currently Payable:
Federal	$	21,221		$	7,075		$	13,737
State
Deferred:
Federal	3,952			14,538			2,147
State	492			510
Total Income Tax Expense	$	25,665		$	22,123		$	15,884
Reconciliation of Federal Statutory to Actual Tax Expense:
Federal Statutory Income Tax at 35%	$	31,867		$	28,800		$	21,145
Tax-exempt Interest Income	(7,083		)	(5,148		)	(3,923		)
Basis Difference on Sale of Insurance Subsidiary	2,252
Stock Compensation	34			36			50
Earnings on Life Insurance	(1,012		)	(1,271		)	(905		)
Tax Credits	(583		)	(911		)	(857		)
Other	190			617			374
Actual Tax Expense	$	25,665		$	22,123		$	15,884

Tax expense applicable to security gains and losses, including unrealized losses relating to other-than-temporary impairment charges, for the years ended December 31, 2015, 2014 and 2013, was $435,000, $760,000 and $157,000, respectively.

The Corporation or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With a few exceptions, the Corporation is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 2012.

The tax effects of temporary differences related to deferred taxes shown on the balance sheets were:



	2015			2014
Deferred Tax Asset at December 31:
Assets:
Differences in Accounting for Loan Losses	$	25,867		$	26,665
Differences in Accounting for Loan Fees	762			747
Differences in Accounting for Loans and Securities	9,359			9,910
Deferred Compensation	5,100			5,234
Difference in Accounting for Pensions and Other Employee Benefits	2,247			1,084
Federal & State Income Tax Loss Carryforward and Credits	23,737			23,977
Other	9,310			8,535
Total Assets	76,382			76,152
Liabilities:
Differences in Depreciation Methods	7,742			8,220
State Income Tax	591			591
Net Unrealized Gain on Securities Available for Sale	6,636			7,591
Gain on FDIC Modified Whole Bank Transaction	1,405			1,694
Other	717			1,096
Total Liabilities	17,091			19,192
Net Deferred Tax Asset Before Valuation Allowance	59,291			56,960
Valuation allowance:
Beginning Balance	(17,568		)	(17,171		)
Decrease/(Increase) During the Year	1,832			(397		)
Ending Balance	(15,736		)	(17,568		)
Net Deferred Tax Asset	$	43,555		$	39,392

The $4,163,000 increase in the Corporation’s net deferred tax asset was primarily driven by a $9,262,000 increase resulting from the Ameriana acquisition. The largest offsetting deferred tax asset decreases not related to the Ameriana acquisition were associated with accounting for loans, federal net operating loss carryforwards, deferred compensation, and allowance for loan losses of $1,873,000, $1,662,000, $857,000 and $789,000, respectively. The deferred tax asset decreases were partially offset by a decline in the deferred tax liability associated with the accounting for unrealized gains on available for sale securities of $955,000.

The Corporation has recorded a valuation allowance of $15,736,000 related to deferred state taxes as it does not anticipate having future state taxable income sufficient to fully utilize the deferred state tax asset. This is primarily due to the Corporation’s current tax structure as discussed in the “INCOME TAXES” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included as item 7 of this Annual Report on Form 10-K.

As of December 31, 2015, the Corporation had approximately $121,626,000 of state tax loss carryforward available to offset future state taxes. This state loss carryforward has a valuation allowance of approximately $120,369,000.

The Corporation has additional paid-in capital that is considered restricted resulting from the acquisitions of CFS and Ameriana of approximately $13,393,000 and $11,883,000, respectively. CFS and Ameriana qualified as a banks under provisions of the Internal Revenue Code which permitted them to deduct from taxable income an allowance for bad debts which differed from the provision for losses charged to income. No provision for income taxes had been provided. If in the future this portion of additional paid-in capital is distributed, or the Corporation no longer qualifies as a bank for income tax purposes, income taxes may be imposed at the then applicable tax rates. The unrecorded deferred tax liability at December 31, 2015, would have been approximately $8,847,000.