(12) Income Taxes

The significant components of income tax expense attributable to operations are:

	Years ended December 31,
	2013		2012			2011
Current
Federal	$	23,536	$	21,011		$	29,274
State		2,316		1,815			1,477
		25,852		22,826			30,751

Deferred
Federal		2,334		(13	)		(8,129	)
State		10		3			(1,349	)
		2,344		(10	)		(9,478	)
Total income tax expense	$	28,196	$	22,816		$	21,273

Not included in the above table are items that were recorded to stockholders’ equity of approximately $7.0 million, ($0.1 million), and ($0.5 million) for 2013, 2012, and 2011, respectively, relating to deferred taxes on the unrealized (gain) loss on available for sale securities, tax benefits recognized with respect to stock options exercised, and deferred taxes related to pension plans.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:

	December 31,
(In thousands)	2013		2012
Deferred tax assets
Allowance for loan and lease losses	$	26,729	$	26,687
Deferred compensation		7,931		5,362
Postretirement benefit obligation		2,596		1,600
Unrealized losses on securities available for sale		5,900		-
Fair value adjustments from acquisitions		-		3,633
Accrued liabilities		3,265		1,524
Stock-based compensation expense		7,862		5,726
Equipment leasing		1,661		-
Other		2,125		1,933
Total deferred tax assets		58,069		46,465
Deferred tax liabilities
Pension and executive retirement		17,417		7,676
Fair value adjustments from acquisitions		2,070		-
Unrealized gains on securities available for sale		-		10,939
Premises and equipment, primarily due to accelerated depreciation		2,270		1,980
Equipment leasing		-		582
Deferred loan costs		1,624		873
Intangible amortization		12,007		13,146
Other		892		154
Total deferred tax liabilities		36,280		35,350
Net deferred tax asset at year-end		21,789		11,115
Net deferred tax asset (liability) at beginning of year		11,115		5,953
Increase in net deferred tax asset	$	10,674	$	5,162

Realization of deferred tax assets is dependent upon the generation of future taxable income or the existence of sufficient taxable income within the available carryback period. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. Based on available evidence, gross deferred tax assets will ultimately be realized and a valuation allowance was not deemed necessary at December 31, 2013 and 2012.

A reconciliation of the beginning and ending balance of gross unrecognized tax benefits is as follows:

(In thousands)	2013		2012			2011
Balance at January 1	$	-	$	888		$	3,081
Additions for tax positions of prior years		-		-			-
Reduction for tax positions of prior years		-		(888	)		(2,193	)
Balance at December 31	$	-	$	-		$	888

At December 31, 2013 and 2012, the Company had no ASC 740-10 unrecognized tax benefits with $.9 million of unrecognized tax benefits at December 31, 2011. The Company does not expect the total amount of unrecognized tax benefits to significantly increase within the next twelve months. During 2012 and 2011 there was a reduction of reserves for Federal tax benefits for expiration of the statute of limitations of prior years’ tax filings and in 2011 the Company reached a settlement with New York State on franchise tax examinations for the years 2003 through 2007. As a result, unrecognized tax benefits were reduced $0.9 million and $2.2 million for 2012 and 2011, respectively, with a reduction of tax expense of $0.8 million in 2012 and $1.5 million in 2011.

The Company is no longer subject to U.S. Federal tax examination by tax authorities for years prior to 2010 and New York State for years prior to 2008.

The Company recognizes interest accrued and penalties related to unrecognized tax benefits in income tax expense. The total amount of accrued interest at December 31, 2011 was approximately $0.1 million. Net interest impacting the Company’s 2011 tax expense was $0.3 million.

The following is a reconciliation of the provision for income taxes to the amount computed by applying the applicable Federal statutory rate of 35% to income before taxes:

	Years ended December 31
(In thousands)	2013			2012			2011
Federal income tax at statutory rate	$	31,482		$	27,081		$	27,711
Tax exempt income		(2,433	)		(2,536	)		(2,925	)
Net increase in CSV of life insurance		(1,166	)		(908	)		(919	)
Low income housing tax credits		(819	)		(629	)		(782	)
State taxes, net of federal tax benefit		1,512			1,182			764
State audit settlements		-			-			(681	)
Other, net		(380	)		(1,374	)		(1,895	)
Income tax expense	$	28,196		$	22,816		$	21,273