(12) INCOME TAXES

The components of the Company’s income tax expense (benefit) are as follows:


	Year Ended December 31,
	2013			2012			2011
	(Dollars in thousands)
Current taxes:
Federal	$	23,326		$	24,928		$	26,489
State		3,682			2,865			3,869
Deferred taxes		(483	)		(689	)		(5,282	)

Total income taxes	$	26,525		$	27,104		$	25,076

Income tax expense applicable to securities transactions approximated $147,000, $1,720,000 and $560,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

A reconciliation of tax expense at the Federal statutory tax rate applied to income before taxes is presented in the following table:


	Year Ended December 31,
	2013			2012			2011
	(Dollars in thousands)
Tax expense at the Federal statutory tax rate	$	28,295		$	27,651		$	24,744
Increase (decrease) in tax expense from:
Tax-exempt income, net		(621	)		(783	)		(904	)
Modified endowment life contracts		(812	)		(870	)		(809	)
State tax expense, net of Federal tax benefit		3,543			3,652			3,916
Federal tax credits		(4,132	)		(2,455	)		(1,227	)
Other, net		252			(91	)		(644	)

Total tax expense	$	26,525		$	27,104		$	25,076

The net deferred tax asset consisted of the following and is reported in other assets:


	December 31,
	2013			2012
	(Dollars in thousands)
Provision for loan losses	$	13,662		$	13,617
Write-downs of other real estate owned		962			915
Deferred compensation		2,237			1,995
Stock-based compensation		2,934			2,707
Investments in partnership interests		1,170			162
Other		1,479			832

Gross deferred tax assets		22,444			20,228

Unrealized net gains on securities		(2,104	)		(3,402	)
Premium on securities of banks acquired		(800	)		(806	)
Intangibles		(2,561	)		(2,397	)
Basis difference related to tax credits		(1,620	)		(775	)
Depreciation		(5,975	)		(4,443	)
Leveraged lease		(2,282	)		(2,607	)
Other		(257	)		(507	)

Gross deferred tax liabilities		(15,597	)		(14,937	)

Net deferred tax asset	$	6,846		$	5,291

The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if applicable, in income tax expense. During the years ended December 31, 2013, 2012 and 2011, the Company did not recognize or accrue any interest and penalties related to unrecognized tax benefits. Federal and various state income tax statutes dictate that tax returns filed in any of the previous three reporting periods remain open to examination which includes the years 2011 to 2013. The Company has no open examinations with either the Internal Revenue Service or any state agency.

Management performs an analysis of the Company’s tax position annually and believes it is more likely than not that all of its tax positions will be utilized in future years.