Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Allocation of Federal Income Tax between Current and Deferred Portion

Allocation of federal income tax between current and deferred portion is as follows:

Years Ended December 31, (in thousands)	2012		2011			2010
Current expense:
Federal	$	51,888	$	50,326		$	27,702
State		1,565		996			642
Deferred expense:
Federal		10,798		(1,287	)		5,167
State		355		13			169
Total	$	64,606	$	50,048		$	33,680

Effective Tax Rates Difference from Federal Statutory rate of 35%

Effective tax rates differ from federal statutory rate of 35% applied to income before income taxes due to the following:

Years Ended December 31,	2012			2011			2010
Federal statutory rate times financial statement income		35.00	%		35.00	%		35.00	%
Effect of:
State taxes, net of federal benefit		0.68	%		0.46	%		0.54	%
General business tax credits		-0.34	%		-0.69	%		-1.09	%
Other, net		-0.22	%		-0.06	%		-0.23	%
Effective tax rate		35.12	%		34.71	%		34.22	%

Deferred Tax Assets and Liabilities

Year-end deferred tax assets and liabilities were due to the following:

Years Ended December 31, (in thousands)	2012			2011
Deferred tax assets:
Allowance for loan losses	$	7,970		$	7,787
Accrued expenses		5,128			3,950
Net operating loss carryforward (1)		1,349			843
Depreciation		334			-
Other-than-temporary impairment		884			805
Total deferred tax assets		15,665			13,385
Deferred tax liabilities:
Unrealized investment securities gains		(3,022	)		(2,229	)
Federal Home Loan Bank dividends		(4,362	)		(4,216	)
Depreciation		-			(159	)
Deferred loan fees		(706	)		(467	)
Mortgage servicing rights		(1,877	)		(2,228	)
Bargain purchase gain		(14,454	)		-
Other		(241	)		(1,689	)
Total deferred tax liabilities		(24,662	)		(10,988	)
Less: Valuation allowance		(1,592	)		(1,040	)
Net deferred tax asset	$	(10,589	)	$	1,357

(1) The Company has a Kentucky net operating loss carry forward of $19 million which began to expire in 2012 and a Florida net operating loss carryforward of $3 million which begins to expire in 2030. The Company maintains a valuation allowance as it does not anticipate generating taxable income in Kentucky or Florida to utilize these carryforwards prior to expiration.

Reconciliation of Beginning and Ending Amount of Unrecognized Tax Benefits

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

December 31, (in thousands)	2012			2011
Balance, beginning of year	$	506		$	473
Additions based on tax related to the current year		146			148
Additions for tax positions of prior years		-			50
Reductions for tax positions of prior years		-			(56	)
Reductions due to the statute of limitations		(57	)		(109	)
Settlements		-			-
Balance, end of year	$	595		$	506

Income Tax Interest and Penalties

December 31, (in thousands)	2012		2011
Interest and penalties recorded in the income statement	$	28	$	(28	)
Interest and penalties accrued		166		138