Income Taxes

A reconciliation of the provision (benefit) for income taxes and the amount that would have been provided at statutory rates is as follows:



	Years Ended December 31,
(in thousands)	2013			2012			2011
Provision (benefit) at statutory rate on pretax income (loss)	$	8,601		$	5,533		$	(392	)
Tax-exempt income on loans and investments	(1,498		)	(1,390		)	(1,314		)
Stock-based compensation	162			203			222
Civil money penalty	—			525			—
Other	51			43			40
Total	$	7,316		$	4,914		$	(1,444	)

The statutory tax rate used to calculate the provision in 2013 and 2012 was 35%, and used to calculate the benefit in 2011 was 34%.

The components of income tax expense (benefit) are as follows:



	Years Ended December 31,
(in thousands)	2013		2012		2011
Current expense	$	7,179	$	4,796	$	67
Deferred expense (benefit)	137		118		(1,511		)
Total	$	7,316	$	4,914	$	(1,444	)

The components of the net deferred tax asset were as follows:



	December 31,
(in thousands)	2013			2012
Deferred tax assets:
Allowance for loan losses	$	8,089		$	8,596
Unrealized losses on securities	8,893			—
Stock-based compensation	1,295			1,094
Nonaccrual interest	1,330			1,605
Other	902			447
Total deferred tax assets	20,509			11,742
Deferred tax liabilities:
Premises and equipment	(3,599		)	(3,762		)
Unrealized gains on securities	—			(3,730		)
Prepaid expenses	(353		)	(254		)
Deferred loan fees	(1,046		)	(971		)
Total deferred tax liabilities	(4,998		)	(8,717		)
Net deferred tax asset	$	15,511		$	3,025

At December 31, 2013, the Company had a net deferred tax asset of $15.5 million. An analysis was conducted to determine if a valuation allowance against its deferred tax assets was required. The Company used current forecasts of future expected income, possible tax planning strategies, current and future economic and business conditions (such as the possibility of a decrease in real estate value for properties the Bank holds as collateral on loans), the probability that taxable income will continue to be generated in future periods and the cumulative losses in previous years to make the assessment. Management concluded that a valuation allowance was not necessary at December 31, 2013.

Tax expense of $232,000, $368,000 and $119,000 was recognized on net securities gains during 2013, 2012 and 2011, respectively. The Company received a tax benefit on its federal income tax return totaling $51,000 for 2013 related to the exercise of nonqualified stock options and disqualified dispositions of employee stock from options exercised. It did not receive such a tax benefit during 2012 or 2011. The Company, or one of its subsidiaries, files income tax returns in the U.S. Federal jurisdiction and various states. The Company is no longer subject to U.S. Federal, state and local examinations by tax authorities for years before 2010.