Note K—Income Taxes

The components of income tax expense (benefit) included in the statements of operations are as follows:


	For the years ended
	December 31,
	2013	2012	2011
	(in thousands)
Current tax provision
Federal	$ 13,201	$ 8,660	$ 5,148
State	3,036	2,033	1,124
	16,237	10,693	6,272
Deferred tax benefit
Federal	(2,322)	(2,751)	(1,512)
State	(90)	(148)	(449)
	(2,412)	(2,899)	(1,961)
	$ 13,825	$ 7,794	$ 4,311

The differences between applicable income tax expense and the amounts computed by applying the statutory federal income tax rate of 35% for 2013, 2012 and 2011, respectively, are as follows:


	For the years ended
	December 31,
	2013	2012	2011
	(in thousands)

Computed tax expense at statutory rate	$ 13,628	$ 8,546	$ 4,498
State taxes	1,915	1,225	445
Tax-exempt interest income	(1,954)	(1,249)	(986)
Other	236	(728)	354
	$ 13,825	$ 7,794	$ 4,311

Deferred income taxes are provided for the temporary difference between the financial reporting basis and the tax basis of the Company’s assets and liabilities. Cumulative temporary differences are as follows:


	For the years ended
	December 31,
	2013	2012
	(in thousands)
Deferred tax assets:
Allowance for loan and lease losses	$ 13,364	$ 11,564
Deferred compensation	1,044	1,005
State taxes	1,064	1,005
Nonqualified stock options	2,652	1,611
Stock appreciation rights	103	103
Tax deductible goodwill	10,397	11,446
Depreciation	276	263
Nonaccrual interest	1,444	1,140
Other than temporary impairment	151	144
Other	285	87
Total deferred tax assets	$ 30,780	$ 28,368
Deferred tax liabilities:
Unrealized gains on investment securities available for sale	300	5,514
Leasing	65	65
Total deferred tax liabilities	365	5,579
Net deferred tax asset	$ 30,415	$ 22,789

We do not provide for deferred taxes on the excess of the financial reporting over the tax basis in our investments in foreign subsidiaries that are essentially permanent in duration. The determination of the additional deferred taxes that have not been provided is not practicable. The Company has net operating loss carryforwards of approximately $284,000, which have a full valuation allowance, at December 31, 2013 from its European operations.

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


	For the years ended
	December 31,
	2013	2012	2011

Beginning balance at January 1	$ 230	$ 119	$ 47
Increases in tax provisions for prior years	122	111	72
Gross unrecognized tax benefits at December 31	$ 352	$ 230	$ 119

The Company files federal and state returns in jurisdictions with varying statutes of limitations. The 2010 through 2013 tax years generally remain subject to examination by federal and most state tax authorities. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in income tax expense for all periods presented.