NOTE

INCOME TAXES

The provision for income taxes is comprised of the following components:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2017		2016		2017		2016
Income taxes currently payable	$	11,946	$	10,327	$	30,467	$	33,139
Deferred income taxes		2,732		455		4,962		1,070
Provision for income taxes	$	14,678	$	10,782	$	35,429	$	34,209

The tax effects of temporary differences related to deferred taxes shown on the balance sheets were:

(In thousands)	September 30, 2017			December 31, 2016

Deferred tax assets:
Loans acquired	$	5,900		$	7,986
Allowance for loan losses		16,841			14,754
Valuation of foreclosed assets		4,020			3,958
Tax NOLs from acquisition		12,642			13,077
Deferred compensation payable		2,983			2,785
Vacation compensation		1,828			1,740
Accrued equity and other compensation		5,138			6,367
Acquired securities		1,201			1,098
Other accrued liabilities		2,301			1,834
Unrealized loss on available-for-sale securities		6,708			9,559
Other		4,610			5,267
Gross deferred tax assets		64,172			68,425
Deferred tax liabilities:
Goodwill and other intangible amortization		(32,189	)		(29,601	)
Accumulated depreciation		(6,403	)		(5,370	)
Other		(7,369	)		(5,877	)
Gross deferred tax liabilities		(45,961	)		(40,848	)

Net deferred tax asset, included in other assets	$	18,211		$	27,577

A reconciliation of income tax expense at the statutory rate to the Company's actual income tax expense for the

three

and

nine

months ended

September 30

is shown below:

	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2017			2016			2017			2016

Computed at the statutory rate (35%)	$	15,235		$	11,974		$	38,313		$	36,418
Increase (decrease) in taxes resulting from:
State income taxes, net of federal tax benefit		342			21			1,117			1,390
Discrete items related to ASU 2016-09		5			--			(1,372	)		--
Tax exempt interest income		(955	)		(1,072	)		(3,160	)		(3,120	)
Tax exempt earnings on BOLI		(178	)		(146	)		(616	)		(665	)
Merger related expenses		187			131			559			131
Federal tax credits		(397	)		(890	)		(1,190	)		(943	)
Other differences, net		439			764			1,778			998
Actual tax provision	$	14,678		$	10,782		$	35,429		$	34,209

The Company follows ASC Topic

740,

Income Taxes

, which prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than

not

that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-

not

recognition threshold is measured at the largest amount of benefit that is greater than

fifty

percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-

not

recognition threshold should be recognized in the

first

subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that

longer meet the more-likely-than-

not

recognition threshold should be derecognized in the

first

subsequent financial reporting period in which that threshold is

longer met. ASC Topic

740

also provides guidance on the accounting for and disclosure of unrecognized tax benefits, interest and penalties.

The amount of unrecognized tax benefits

may

increase or decrease in the future for various reasons including adding amounts for current tax year positions, expiration of open income tax returns due to the statutes of limitation, changes in management’s judgment about the level of uncertainty, status of examinations, litigation and legislative activity and the addition or elimination of uncertain tax positions.

Section

382

of the Internal Revenue Code imposes an annual limit on the ability of a corporation that undergoes an “ownership change” to use its U.S. net operating losses to reduce its tax liability. The Company closed a stock acquisition in a prior year that invoked the Section

382

annual limitation. Approximately

$36.5

million of federal net operating losses subject to the IRC Sec

382

annual limitation are expected to be utilized by the Company. The net operating loss carryforwards expire between

2028

and

2035.

The Company files income tax returns in the U.S. federal jurisdiction. The Company’s U.S. federal income tax returns are open and subject to examinations from the

2014

tax year and forward. The Company’s various state income tax returns are generally open from the

2014

and later tax return years based on individual state statute of limitations.