Income Taxes

12 Months Ended

Dec. 31, 2013

Income Taxes [Abstract]

Income Taxes

NOTE 12  INCOME TAXES:

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

		Years Ended December 31,
		2013		2012		2011
		($ in Thousands)
Current:
	Federal	$	50,628	$	19,724	$	9,336
	State		2,653		1,468		(350)
Total current			53,281		21,192		8,986
Deferred:
	Federal		16,409		41,908		37,553
	State		9,511		12,386		(2,811)
Total deferred			25,920		54,294		34,742
Total income tax expense		$	79,201	$	75,486	$	43,728

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.

		2013		2012
		($ in Thousands)
Gross deferred tax assets:
	Allowance for loan losses	$	104,944	$	115,128
	Allowance for other losses		13,790		18,205
	Accrued liabilities		6,101		6,055
	Deferred compensation		28,911		27,073
	Securities valuation adjustment		1,724		2,258
	Benefit of tax loss and credit carryforwards		32,552		46,376
	Nonaccrual interest		4,431		1,112
	Other		9,433		8,518
Total gross deferred tax assets			201,886		224,725
Gross deferred tax liabilities:
	FHLB stock dividends		6,425		7,602
	Prepaid expenses		61,225		55,944
	Intangible amortization		28,914		28,478
	Mortgage banking activities		14,497		6,257
	Deferred loan fee income		25,480		26,800
	State income taxes		12,754		16,083
	Leases		2,525		2,269
	Depreciation		17,931		22,386
	Other		1,374		2,225
Total gross deferred tax liabilities			171,125		168,044
Net deferred tax assets			30,761		56,681
Tax effect of unrealized (gain) loss related to available for sale securities			7,685		(53,579)
Tax effect of unrealized loss related to pension and postretirement benefits			8,024		23,586
			15,709		(29,993)
Net deferred tax assets including items with tax effect recorded directly to OCI		$	46,470	$	26,688

At December 31, 2013 and 2012, there was no valuation allowance for deferred tax assets.

At December 31, 2013, the Corporation had state net operating losses of $406 million (of which, $35 million was acquired from various acquisitions) that will expire in the years 2024 through 2031. $235 million of these state net operating loss carryforwards do not expire until after 2031.

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

		2013		2012		2011
Federal income tax rate at statutory rate		35.0	%	35.0	%	35.0	%
Increases (decreases) resulting from:
	Tax-exempt interest and dividends	(4.5)		(4.9)		(7.0)
	State income taxes (net of federal income taxes)	2.9		3.6		3.8
	Bank owned life insurance	(1.5)		(1.9)		(2.8)
	Valuation allowance	0.0		0.0		(3.3)
	Federal tax credits	(1.0)		(1.2)		(1.7)
	Tax reserve adjustments	(1.9)		(1.8)		(0.6)
	Compensation deduction limitations	0.1		0.4		0.7
	Other	0.5		0.5		(0.3)
Effective income tax rate		29.6	%	29.7	%	23.8	%

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, 2013. 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 2010 tax return year and forward. Generally, tax return years prior to the 2007 tax return year are no longer subject to state and local income tax examination.

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

	2013		2012
	($ in Millions)
Balance at beginning of year	$	13	$	21
Changes in tax positions for prior years		1		-
Statute expiration		(8)		(8)
Balance at end of year	$	6	$	13

At December 31, 2013 and 2012, the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $4 million and $8 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. As of December 31, 2013, the Corporation had $2 million of interest and penalties (including a $3 million net reduction of previously accrued interest and penalties during 2013) on unrecognized tax benefits of which $2 million had an impact on the effective tax rate. As of December 31, 2012, the Corporation had $5 million of interest and penalties (including a $1 million net reduction of previously accrued interest and penalties during2012) on unrecognized tax benefits of which $3 million had an impact on the effective tax rate. Management does not anticipate significant adjustments to the total amount of unrecognized tax benefits within the next twelve months.