INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2012

Summary of Income Tax Expense

Income tax expense for the years ended December 31, 2012, 2011, and 2010 consisted of the following:

	2012		2011			2010
	(in thousands)
Current expense:
Federal	$	35,684	$	52,207		$	24,195
State		2,666		26,610			11,400
		38,350		78,817			35,595
Deferred expense (benefit):
Federal and State		28,398		(16,111	)		19,334
Total income tax expense	$	66,748	$	62,706		$	54,929

Summary of Deferred Tax Assets and Liabilities

The tax effects of temporary differences that gave rise to the significant portions of the deferred tax assets and liabilities as of December 31, 2012 and 2011 are as follows:

	2012		2011
	(in thousands)
Deferred tax assets:
Allowance for loan losses	$	53,407	$	54,880
Depreciation		4,972		1,666
Pension plans		5,075		2,771
Employee benefits		11,775		9,102
Investment securities, including other-than-temporary impairment losses		24,196		35,569
Net operating loss carryforwards		62,053		63,806
Purchase accounting		14,251		—
Accrued interest		12,515		9,050
Other		23,416		20,869
Total deferred tax assets		211,660		197,713
Deferred tax liabilities:
Purchase accounting		—		8,727
Other investments		11,182		6,614
Deferred income		15,886		—
Other		13,353		10,164
Total deferred tax liabilities		40,421		25,505
Net deferred tax asset (included in other assets)	$	171,239	$	172,208

Summary of Income Tax Reconciliation

Reconciliation between the reported income tax expense and the amount computed by multiplying consolidated income before taxes by the statutory federal income tax rate of 35 percent for the years ended December 31, 2012, 2011, and 2010 were as follows:

	2012			2011			2010
	(in thousands)
Federal income tax at expected statutory rate	$	73,631		$	68,326		$	64,727
(Decrease) increase due to:
Tax-exempt interest, net of interest incurred to carry tax-exempt securities		(4,478	)		(3,736	)		(3,451	)
Bank owned life insurance		(2,399	)		(2,583	)		(2,158	)
State income tax expense, net of federal tax effect		8,204			12,727			629
Tax credits		(10,070	)		(12,760	)		(5,071	)
Other, net		1,860			732			253
Income tax expense	$	66,748		$	62,706		$	54,929

Summary of Reconciliation of Gross Unrecognized Tax Benefits

A reconciliation of Valley’s gross unrecognized tax benefits for 2012, 2011, and 2010 are presented in the table below:

	2012			2011			2010
	(in thousands)
Beginning balance	$	33,000		$	21,142		$	21,965
Additions based on tax positions related to prior years		4,195			13,366			732
Settlements with taxing authorities		(5,038	)		—			—
Reductions due to expiration of statute of limitations		(1,105	)		(1,508	)		(1,555	)
Ending balance	$	31,052		$	33,000		$	21,142