Income Taxes

The income tax provision for the years ended December 31 is as follows:



	2016			2015		2014
	(dollars in thousands)
Current tax provision
Federal	$	19,879		$	8,610	$	12,661
State	154			68		157
Total current tax provision	20,033			8,678		12,818
Deferred tax provision (benefit):
Federal	5,846			12,158		4,862
State	(240		)	—		—
Total deferred tax provision	5,606			12,158		4,862
Total tax provision	$	25,639		$	20,836	$	17,680

The statutory to effective tax rate reconciliation for the years ended December 31 is as follows:



	2016					2015					2014
	Amount			% of Pretax Income		Amount			% of Pretax Income		Amount			% of Pretax Income
	(dollars in thousands)
Tax at statutory rate	$	29,830		35	%	$	24,843		35	%	$	21,747		35	%
Increase (decrease) resulting from:
Income from bank owned life insurance	(1,883		)	(2	)	(1,894		)	(3	)	(1,926		)	(3	)
Tax-exempt interest income, net	(2,434		)	(3	)	(2,232		)	(3	)	(2,133		)	(4	)
Tax credits	—			—		(61		)	—		(134		)	—
Other	126			—		180			—		126			—
Total tax provision	$	25,639		30	%	$	20,836		29	%	$	17,680		28	%

The total tax provision for financial reporting differs from the amount computed by applying the statutory federal income tax rate to income before taxes. First Commonwealth ordinarily generates an annual effective tax rate that is less than the statutory rate of 35% due to benefits resulting from tax-exempt interest, income from bank owned life insurance and tax benefits associated with low income housing tax credits. The consistent level of tax benefits that reduce First Commonwealth’s tax rate below the 35% statutory rate produced an annual effective tax rate of 30%, 29% and 28% for the years ended December 31, 2016, 2015 and 2014, respectively.

The tax effects of temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities that represent significant portions of the deferred tax assets and liabilities at December 31 are presented below:



	2016			2015
	(dollars in thousands)
Deferred tax assets:
Allowance for credit losses	$	17,616		$	17,784
Postretirement benefits other than pensions	611			641
Alternative minimum tax credit carryforward	—			5,065
Litigation reserve	106			—
Unrealized loss on securities available for sale	3,905			1,291
Writedown of other real estate owned	1,266			1,087
Deferred compensation	1,966			2,113
Accrued interest on nonaccrual loans	1,701			1,452
Other-than-temporary impairment of securities	88			89
Depreciation of assets	—			879
Accrued incentives	2,627			1,629
Unfunded loan commitment allowance	1,452			1,557
Accrued severance	102			808
Basis difference in assets acquired	296			417
Loan origination fees and costs	290			141
Deferred rent	1,285			1,258
Other	1,084			1,105
Total deferred tax assets	34,395			37,316
Deferred tax liabilities:
Income from unconsolidated subsidiary	(623		)	(619		)
Depreciation of assets	(28		)	—
Other	(429		)	(337		)
Total deferred tax liabilities	(1,080		)	(956		)
Net deferred tax asset	$	33,315		$	36,360

Management assesses all available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. Based on on our evaluation, of December 31, 2016, management has determined that no valuation allowance is necessary for the deferred tax assets because it is more likely than not that these assets will be realized through a carry-back to taxable income in prior years, future reversals of existing temporary differences, and through future taxable income.

In accordance with FASB ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes," the Company has no material unrecognized tax benefits or accrued interest and penalties as of December 31, 2016. We do not expect the total amount of unrecognized tax benefits to significantly increase in the next twelve months. The Company records interest and penalties on unrecognized tax benefits as a component of noninterest expense.

First Commonwealth is subject to routine audits of our tax returns by the Internal Revenue Service ("IRS") as well as all states in which we conduct business. During 2015, the IRS completed an examination of our 2013 federal tax return. The examination was closed with no adjustments. Generally, tax years prior to the year ended December 31, 2013 are no longer open to examination by federal and state taxing authorities.