INCOME TAXES

At December 31, income tax expense consisted of the following:



(Dollars in thousands)	2015			2014			2013
Current tax expense
Federal	$	105,367		$	84,430		$	46,848
State	16,111			13,941			7,080
Total current tax expense	121,478			98,371			53,928
Deferred tax (benefit) expense
Federal	(2,758		)	(30,658		)	38,731
State	3,308			(2,681		)	8,915
Total deferred tax (benefit) expense	550			(33,339		)	47,646
Total income tax expense	$	122,028		$	65,032		$	101,574

Income tax expense differed from the amounts computed by applying the federal income tax rate of 35 percent to pretax income as a result of the following:



(Dollars in thousands)	2015			2014			2013
Income taxes at statutory rates	$	116,345		$	71,258		$	93,956
Increase (reduction) in income taxes resulting from:
Nontaxable income on loans, leases and investments, net of nondeductible expenses	(3,020		)	(1,832		)	(1,185		)
State and local income taxes, including change in valuation allowance, net of federal income tax benefit	12,622			7,319			10,397
Acquisition stock settlement	—			(10,185		)	—
Tax credits net of amortization	(3,060		)	(2,896		)	(960		)
Other, net	(859		)	1,368			(634		)
Total income tax expense	$	122,028		$	65,032		$	101,574

The net deferred tax asset included the following components at December 31:



(Dollars in thousands)	2015		2014
Allowance for loan and lease losses	$	78,878	$	79,537
Pension liability	7,206		17,147
Executive separation from service agreements	9,856		13,753
State operating loss carryforward	21		29
Unrealized loss on cash flow hedge	537		1,673
Net unrealized loss on securities included in accumulated other comprehensive loss	9,379		—
Accelerated depreciation	13,195		3,495
FDIC assisted transactions timing differences	66,456		77,388
Other reserves	10,772		12,770
Other	29,279		26,788
Deferred tax asset	225,579		232,580
Lease financing activities	15,492		12,706
Net unrealized gain on securities included in accumulated other comprehensive loss	—		3,245
Net deferred loan fees and costs	6,051		4,532
Intangible assets	2,040		7,789
Security, loan and debt valuations	31,486		40,910
Other	12,026		13,287
Deferred tax liability	67,095		82,469
Net deferred tax asset	$	158,484	$	150,111

On October 1, 2014, Bancorporation merged with and into BancShares in a statutory merger treated as a "reorganization" within the meaning of section 368(a) of the Internal Revenue Code of 1986 as amended. Income tax expense in 2014 has been adjusted for the settlement of the ownership of Bancorporation stock at the date of the merger. Income tax expense has also been adjusted for the revaluation of the acquired deferred inventory to reflect the rates that will apply under currently enacted tax law when the temporary differences are expected to reverse.

No valuation allowance was necessary at December 31, 2015 or 2014 to reduce BancShares’ gross state deferred tax asset to the amount that is more likely than not to be realized.

Under GAAP, the benefit of a position taken or expected to be taken in a tax return should be recognized when it is more likely than not that the position will be sustained based on its technical merit. The liability for unrecognized tax benefits was not material at December 31, 2015 and 2014, and changes in the liability were not significant during 2015, 2014 and 2013. BancShares does not expect the liability for unrecognized tax benefits to change significantly during 2016. BancShares recognizes interest and penalties, if any, related to income tax matters in income tax expense, and the amounts recognized during 2015, 2014 and 2013 were not material.

During the third quarter of 2015, BancShares adjusted its net deferred tax asset as a result of reductions in the North Carolina corporate income tax rate that will become effective January 1, 2016. The lower corporate income tax rate resulted in a reduction in the deferred tax asset and an increase in income tax expense in 2015.

BancShares, its subsidiaries', and Bancorporation's federal income tax returns for 2012 through 2014 remain open for examination. Generally, the state jurisdictions in which BancShares files income tax returns are subject to examination for a period up to four years after returns are filed. BancShares state tax returns are currently under examination in California for 2011 and 2012 and in Florida for 2011 through 2013.