Income Taxes

(In Thousands)

Significant components of the provision for income taxes (benefits) are as follows for the periods presented:



	Year Ended December 31,
	2016		2015		2014
Current
Federal	$	31,679	$	17,004	$	16,474
State	2,131		995		540
	33,810		17,999		17,014
Deferred
Federal	10,480		12,625		8,649
State	557		1,126		642
	11,037		13,751		9,291
	$	44,847	$	31,750	$	26,305

The reconciliation of income taxes computed at the United States federal statutory tax rates to the provision for income taxes is as follows:



	Year Ended December 31,
	2016			2015			2014
Tax at U.S. statutory rate	$	47,522		$	34,918		$	30,061
Increase (decrease) in taxes resulting from:
Tax-exempt interest income	(3,467		)	(3,377		)	(3,215		)
BOLI income	(1,622		)	(1,264		)	(1,045		)
Investment tax credits	(1,390		)	(1,390		)	(1,390		)
Amortization of investment in low-income housing tax credits	1,742			1,734			1,594
State income tax expense, net of federal benefit	1,747			1,378			921
Decrease to valuation allowance	—			—			(152		)
Other items, net	315			(249		)	(469		)
	$	44,847		$	31,750		$	26,305

Significant components of the Company’s deferred tax assets and liabilities are as follows for the periods presented:



	December 31,
	2016		2015
Deferred tax assets
Allowance for loan losses	$	19,934	$	17,430
Loans	23,240		26,239
Deferred compensation	11,254		17,060
Net unrealized losses on securities	10,096		6,065
Impairment of assets	2,512		3,271
Net operating loss carryforwards	2,867		3,681
Other	7,149		7,499
Gross deferred tax assets	77,052		81,245
Valuation allowance on state net operating loss carryforwards	—		—
Total deferred tax assets	77,052		81,245
Deferred tax liabilities
FDIC indemnification asset	—		1,927
Investment in partnerships	1,556		2,507
Core deposit intangible	—		3,386
Depreciation	2,517		673
Mortgage servicing rights	3,360		4,032
Subordinated debt	4,111		4,287
Other	2,876		2,364
Total deferred tax liabilities	14,420		19,176
Net deferred tax assets	$	62,632	$	62,069

The Company and its subsidiaries file a consolidated U.S. federal income tax return. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ending December 31, 2013 through 2015. The Company and its subsidiaries’ state income tax returns are open to audit under the statute of limitations for the years ended December 31, 2013 through 2015.

The Company acquired federal and state net operating losses as part of the Heritage acquisition. The federal net operating loss acquired totaled $18,321, of which $6,883 remained to be utilized as of December 31, 2016, while state net operating losses totaled $17,168, of which $11,412 remained to be utilized as of December 31, 2016. Both the federal and state net operating losses will expire at various dates beginning in 2031.

The Company expects to utilize the federal and state net operating losses prior to expiration. Because the benefits are expected to be fully realized, the Company recorded no valuation allowance against the net operating losses for the year end December 31, 2016.

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest, related to federal and state income tax matters as of December 31 is as follows:



	2016		2015			2014
Balance at January 1	$	1,485	$	2,653		$	2,178
Additions based on positions related to current period	25		367			475
Additions based on positions related to prior period	—		—			—
Reductions based on positions related to prior period	—		(201		)	—
Settlements	—		(1,334		)	—
Reductions due to lapse of statute of limitations	—		—			—
Balance at December 31	$	1,510	$	1,485		$	2,653

If ultimately recognized, the Company does not anticipate any material increase in the effective tax rate for 2016 relative to any tax positions taken prior to January 1, 2016. The Company had accrued $169, $125 and $686 for interest and penalties related to unrecognized tax benefits as of December 31, 2016, 2015 and 2014, respectively.