Income Taxes

A reconciliation of income tax computed at applicable Federal statutory income tax rates to total income tax expense reported for the three months ended March 31, 2016 and 2015 is as follows:



(Dollars in thousands)	Three Months Ended
	March 31, 2016			March 31, 2015
Income before income taxes	$	15,620		$	17,843
Income taxes computed at Federal statutory tax rate	5,467			6,245
Effect of:
State taxes (net of federal benefit)	470			452
Tax-exempt interest income, net	(170		)	(489		)
Contingent value right expense (CVR)	—			—
Other, net	13			246
Total income tax expense	$	5,780		$	6,454

The Company uses an estimated annual effective tax rate method of computing its interim tax provision. The effective tax rate is based on forecasted annual pre-tax income, permanent differences and statutory tax rates. For the three months ended March 31, 2016, the effective income tax rate was 37%. For the three months ended March 31, 2015, the effective income tax rate was 36%. The change in effective income tax rate was mainly due to lower tax-exempt interest income.

The Company and its subsidiaries are subject to U.S. federal income tax, as well as income tax of the states of Florida, South and North Carolina and Tennessee. The net deferred tax assets as of March 31, 2016 and December 31, 2015 were $95.4 million and $105.3 million, respectively. A valuation allowance related to deferred tax assets is required when it is considered more likely than not that all or part of the benefit related to such assets will not be realized. In assessing the need for a valuation allowance, the Company considered both positive and negative evidence in concluding that no valuation allowance was necessary at March 31, 2016 and December 31, 2015.

At March 31, 2016 and December 31, 2015, the company had $104.9 million and $107.7 million of gross federal net operating loss carryforwards, respectively, which begin to expire after 2029 if unused and are subject to annual cumulative limitation of $10.9 million.

At March 31, 2016 and December 31, 2015, the Company had no unrecognized tax benefits and no amounts recorded for uncertain tax positions.