Income Taxes

The provision for income taxes charged to operations consists of the following for the years ended September 30, 2016, 2015 and 2014:



	September 30,
	2016			2015		2014
	(dollars in thousands)
Currently paid or payable
Federal	$	51,749		$	38,105	$	58,172
State	8,677			7,342		8,638
	60,426			45,447		66,810
Deferred tax (benefit) expense
Federal	(1,513		)	6,688		(11,840		)
State	(50		)	$	352	$	(623	)
Total	(1,563		)	7,040		(12,463		)
Total provision for income taxes	$	58,863		$	52,487	$	54,347

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate of 35% to pretax income due to the following for the years ended September 30, 2016, 2015 and 2014:



	September 30,
	2016			2015			2014
	(dollars in thousands)
Income tax expense computed at the statutory rate	$	63,041		$	56,543		$	55,754
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal benefit	5,608			4,772			5,615
Tax exempt interest income	(7,534		)	(6,560		)	(4,926		)
Other	(2,252		)	(2,268		)	(2,096		)
Income tax expense, as reported	$	58,863		$	52,487		$	54,347

Net deferred tax assets (liabilities) consist of the following components at September 30, 2016 and 2015:



	September 30,
	2016			2015
	(dollars in thousands)
Deferred tax assets:
Allowance for loan and lease losses	$	27,005		$	23,412
Compensation	6,306			3,989
Net operating loss carryforward	17			68
Securities available for sale	—			—
Other real estate owned	1,231			3,223
Core deposit intangible and other fair value adjustments	7,303			11,068
Excess tax basis of FDIC indemnification asset and clawback liability	2,514			611
Excess tax basis of loans acquired over carrying value	12,896			5,004
Other	4,580			2,232
Total deferred tax assets	61,852			49,607
Deferred tax liabilities:
Goodwill and other intangibles	(11,555		)	(10,504		)
Securities available for sale	(3,398		)	(1,436		)
Premises and equipment	(7,758		)	(3,908		)
Excess carrying value of FDIC indemnification asset and clawback liability	—			—
Other	(795		)	(1,289		)
Total deferred tax liabilities	(23,506		)	(17,137		)
Net deferred tax assets	$	38,346		$	32,470

The Company was required to file a consolidated income tax return with NAI until its dissolution in October 2014. At September 30, 2016 the Company had an income tax receivable from the IRS of $0.2 million and an income tax payable of $1.6 million to National Americas Holdings, LLC (the parent company of NAI prior to its dissolution), the net of which is included in other assets on the consolidated balance sheets. At September 30, 2015, the Company had an income tax receivable from the IRS of $4.9 million and an income tax payable of $1.6 million.

Management has determined a valuation reserve is not required for the deferred tax assets as of September 30, 2016 and 2015 because it is more likely than not these assets could be realized through carry back to taxable income in prior years, future reversals of existing taxable temporary differences, and future taxable income.

Due to the HF Financial acquisition, the Company maintains an unrecaptured tax bad debt reserve of approximately $4.8 million related to HF Financial’s pre-1987 tax bad debt reserve for which no deferred federal income tax liability has been recognized. These amounts represent an allocation of income to bad debt deductions for tax purposes only. If the Bank no longer qualifies as a bank, or in the event of a liquidation of the Bank, income would be created for tax purposes only, which would be subject to the then current corporate income tax rate. The unrecorded deferred income tax liability on the above amount for financial statement purposes is approximately $1.8 million.

Uncertain tax positions were not significant at September 30, 2016 or 2015.

The Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 2012. In July 2014, the IRS issued the final report on their examination of federal income tax returns for the periods ended September 30, 2010 and 2011. The results of the examination did not have a material effect on our financial condition or results of operations.