Income Taxes

The current and deferred amounts of income tax expense (benefit) were as follows.



	Years Ended December 31,
	2016		2015			2014
	($ in Thousands)
Current:
Federal	$	73,781	$	82,449		$	74,646
State	2,885		2,560			1,000
Total current	76,666		85,009			75,646
Deferred:
Federal	3,338		(10,606		)	(805		)
State	7,318		7,084			10,695
Total deferred	10,656		(3,522		)	9,890
Total income tax expense	$	87,322	$	81,487		$	85,536

Temporary differences between the amounts reported in the financial statements and the tax bases of assets and liabilities resulted in deferred taxes. Deferred tax assets and liabilities at December 31 were as follows.



	2016		2015
	($ in Thousands)
Deferred tax assets:
Allowance for loan losses	$	100,891	$	106,258
Allowance for other losses	11,080		10,906
Accrued liabilities	5,969		6,802
Deferred compensation	33,169		31,677
State net operating losses	7,882		14,154
Nonaccrual interest	1,085		1,901
Net unrealized losses on available-for-sale securities	16,980		219
Net unrealized losses on pension and postretirement benefits	21,218		20,404
Other	8,128		5,811
Total deferred tax assets	206,402		198,132
Deferred tax liabilities:
FHLB stock dividends	—		2,165
Prepaid expenses	70,943		69,396
Goodwill	27,365		25,770
Mortgage banking activities	17,569		15,704
Deferred loan fee income	16,474		17,770
State deferred taxes	3,800		6,366
Lease financing	1,975		3,042
Bank premises and equipment	7,698		7,491
Other	8,594		9,062
Total deferred tax liabilities	154,418		156,766
Net deferred tax assets	$	51,984	$	41,366

At December 31, 2016 and 2015, there was no valuation allowance for deferred tax assets. Management has determined that it is more likely than not that these assets could be realized through carry back to taxable income in prior years, future reversals of existing taxable temporary differences and future taxable income. This conclusion is based on the Corporation's historical earnings, its current level of earnings and prospects for continued growth and profitability.

At December 31, 2016, the Corporation had state net operating loss carryforwards of $100 million (of which, $16 million was acquired from various acquisitions) that will begin expiring in 2032.

The effective income tax rate differs from the statutory federal tax rate. The major reasons for this difference were as follows.



	2016		2015		2014
Federal income tax rate at statutory rate	35.0	%	35.0	%	35.0	%
Increases (decreases) resulting from:
Tax-exempt interest and dividends	(4.8	)%	(5.0	)%	(4.6	)%
State income taxes (net of federal benefit)	2.3	%	2.3	%	2.8	%
Bank owned life insurance	(1.7	)%	(1.2	)%	(1.7	)%
Tax effect of tax credits and benefits, net of related expenses	(0.8	)%	(0.5	)%	(1.4	)%
Tax reserve adjustments	0.3	%	(0.6	)%	0.7	%
Other	0.1	%	0.2	%	0.2	%
Effective income tax rate	30.4	%	30.2	%	31.0	%

Savings banks acquired by the Corporation in 1997 and 2004 qualified under provisions of the Internal Revenue Code that permitted them to deduct from taxable income an allowance for bad debts that differed from the provision for such losses charged to income for financial reporting purposes. Accordingly, no provision for income taxes has been made for $100 million of retained income at December 31, 2016. If income taxes had been provided, the deferred tax liability would have been approximately $40 million. Management does not expect this amount to become taxable in the future, therefore, no provision for income taxes has been made.

The Corporation and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Corporation’s federal income tax returns are open and subject to examination from the 2013 tax return year and forward. The years open to examination by state and local government authorities varies by jurisdiction.

A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows.



	2016		2015
	($ in Millions)
Balance at beginning of year	$	9	$	9
Subtractions for tax positions related to prior years	—		(2		)
Additions for tax positions related to current year	1		2
Balance at end of year	$	10	$	9

At December 31, 2016 and 2015, the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $7 million and $6 million, respectively.

The Corporation recognizes interest and penalties accrued related to unrecognized tax benefits in the income tax expense line of the consolidated statements of income. Interest and penalty expense (benefit) was $0 and $(1) million, as of December 31, 2016 and 2015, respectively. At December 31, 2016 and 2015, accrued interest and penalties was $2 million. Management does not anticipate significant adjustments to the total amount of unrecognized tax benefits within the next twelve months.