Note 16 – Income Taxes

The following table provides the components of income tax expense for the years ended December 31:

(In thousands)	2013		2012		2011
Current income taxes:
Federal	$	15,391	$	11,199	$	6,840
State		3,824		2,913		2,327
Total current		19,215		14,112		9,167
Deferred income taxes:
Federal		2,743		3,116		5,640
State		605		817		1,038
Total deferred		3,348		3,933		6,678
Total income tax expense	$	22,563	$	18,045	$	15,845

The Company does not have uncertain tax positions that are deemed material, and did not recognize any adjustments for unrecognized tax benefits.

Temporary differences between the amounts reported in the financial statements and the tax bases of assets and liabilities result in deferred taxes. Deferred tax assets and liabilities, shown as the sum of the appropriate tax effect for each significant type of temporary difference, are presented in the following table at December 31 for the years indicated:

(In thousands)		2013		2012
Deferred Tax Assets:
Allowance for loan and lease losses	$	15,479	$	17,132
Employee benefits		1,606		1,505
Pension plan OCI		2,211		5,933
Deferred loan fees and costs		281		579
Non-qualified stock option expense		446		376
Losses on other real estate owned		123		756
Other than temporary impairment		323		323
Loan and deposit premium/discount		882		2,267
Depreciation		-		-
Reserve for recourse loans		200		199
Loss carryforward		132		88
Other		79		145
Gross deferred tax assets		21,762		29,304
Valuation allowance		(132)		(88)
Net deferred tax assets		21,630		29,216

Deferred Tax Liabilities:
Unrealized gains on investments available for sale		(237)		(13,436)
Pension plan costs		(2,086)		(2,644)
Depreciation		(547)		(704)
Intangible assets		(785)		(568)
Bond accretion		(105)		(109)
Other		(16)		(16)
Gross deferred tax liabilities		(3,776)		(17,477)
Net deferred tax asset	$	17,854	$	11,739

The reconcilements between the statutory federal income tax rate and the effective rate for the years ended December 31 are presented in the following table:

(Dollars in thousands)	2013				2012				2011
			Percentage of				Percentage of				Percentage of
			Pre-Tax				Pre-Tax				Pre-Tax
	Amount		Income		Amount		Income		Amount		Income
Income tax expense at federal statutory rate	$	23,445	35.0	%	$	19,110	35.0	%	$	17,481	35.0	%
Increase (decrease) resulting from:
Tax exempt income, net		(3,185)	(4.7)			(2,927)	(5.4)			(2,945)	(5.9)
Bank-owned life insurance		(875)	(1.3)			(916)	(1.7)			(923)	(1.9)
State income taxes, net of federal income tax benefits		2,879	4.3			2,424	4.4			2,187	4.4
Other, net		299	0.4			354	0.7			45	0.1
Total income tax expense (benefit) and rate	$	22,563	33.7	%	$	18,045	33.0	%	$	15,845	31.7	%

The increase in the effective tax rate over the three year period was due primarily to the increase in income before taxes compared to the amount of tax exempt income.