INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):



	2014		2013
Deferred tax assets:
Previously securitized loans	$	4,703	$	5,166
Allowance for loan losses	7,413		7,566
Deferred compensation payable	3,966		3,774
Underfunded pension liability	3,113		1,675
Accrued expenses	2,451		2,830
Impaired assets	1,172		1,028
Impaired securities losses	8,377		9,519
Unrealized securities losses	—		1,230
Intangible assets	4,946		8,081
Other	3,292		3,109
Total Deferred Tax Assets	39,433		43,978
Deferred tax liabilities:
Unrealized securities gains	741		—
Other	1,926		1,813
Total Deferred Tax Liabilities	2,667		1,813
Net Deferred Tax Assets	$	36,766	$	42,165

No valuation allowance for deferred tax assets was recorded at December 31, 2014 and 2013 as the Company believes it is more likely than not that all of the deferred tax assets will be realized because they were supported by recoverable taxes paid in prior years.

Significant components of the provision for income taxes are as follows (in thousands):



	2014			2013		2012
Current:
Federal	$	20,629		$	18,808	$	15,509
State	(943		)	1,781		2,259
Total current tax expense	19,686			20,589		17,768

Total deferred tax expense (benefit)	4,585			4,686		2,530
Income tax expense	$	24,271		$	25,275	$	20,298

A reconciliation of the significant differences between the federal statutory income tax rate and the Company’s effective income tax rate is as follows (in thousands):



	2014			2013			2012

Computed federal taxes at statutory rate	$	27,031		$	25,722		$	20,735
State income taxes, net of federal tax benefit	(482		)	1,982			1,591
Tax effects of:
Tax-exempt interest income	(500		)	(616		)	(712		)
Bank-owned life insurance	(1,074		)	(1,187		)	(1,044		)
Tax reserve adjustment	—			24			8
Other items, net	(704		)	(650		)	(280		)
Income tax expense	$	24,271		$	25,275		$	20,298

The entire amount of the Company’s unrecognized tax benefits if recognized, would favorably affect the Company’s effective tax rate. The Company anticipates that it will release $0.9 million over the next 12 months. A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows (in thousands):



	2014			2013

Beginning balance	$	4,717		$	4,376
Additions for current year tax positions	486			341
Additions for prior year tax positions	—			—
Decreases for prior year tax positions	—			—
Decreases for settlements with tax authorities	—			—
Decreases related to lapse of applicable statute of limitation	(2,805		)	—
Ending balance	$	2,398		$	4,717

Interest and penalties on income tax uncertainties are included in income tax expense. During 2014, 2013 and 2012, the provision related to interest and penalties was $0.1 million, $0.1 million, and $0.2 million, respectively. The balance of accrued interest and penalties at December 31, 2014 and 2013 was $0.4 million and $0.3 million, respectively.

The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and state taxing authorities for the years ended December 31, 2011 through 2013.