Federal Income Taxes

12 Months Ended

Dec. 31, 2015

FEDERAL INCOME TAXES

The provision for federal income taxes was less than that computed by applying the federal statutory income tax rate of 35% to pre-tax income, primarily due to tax-exempt interest income on investment securities and loans and income tax credits during 2015, 2014 and 2013. The differences between the provision for federal income taxes computed at the federal statutory income tax rate and the amounts recorded in the consolidated financial statements were as follows:



	Years Ended December 31,
	2015			2014			2013
	(Dollars in thousands)
Tax at statutory rate	$	43,341		$	31,367		$	28,388
Changes resulting from:
Tax-exempt interest income	(3,918		)	(3,118		)	(2,746		)
Income tax credits, net	(2,557		)	(1,624		)	(1,615		)
Other, net	134			875			273
Provision for federal income taxes	$	37,000		$	27,500		$	24,300
Effective federal income tax rate	29.9		%	30.7		%	30.0		%

The provision for federal income taxes consisted of the following:



	Years Ended December 31,
	2015		2014			2013
	(In thousands)
Current expense	$	31,300	$	29,200		$	23,665
Deferred expense (benefit)	5,700		(1,700		)	635
Total federal income tax expense	$	37,000	$	27,500		$	24,300

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant temporary differences that comprise the deferred tax assets and liabilities of the Corporation were as follows:



	December 31,
	2015		2014
	(In thousands)
Deferred tax assets:
Allowance for loan losses	$	24,863	$	26,489
Acquisition-related fair value adjustments	29,280		19,457
Accrued expenses not currently deductible	9,331		7,819
Net operating loss carryforward	7,130		—
Premises and equipment	4,333		3,311
Nonaccrual loan interest	4,994		4,682
Other	15,296		9,418
Total deferred tax assets	95,227		71,176
Deferred tax liabilities:
Core deposit intangible assets	7,379		5,072
Goodwill	5,808		5,205
Mortgage servicing rights	3,893		4,276
Other	7,957		3,884
Total deferred tax liabilities	25,037		18,437
Net deferred tax assets	$	70,190	$	52,739

Management expects to realize the full benefits of the deferred tax assets recorded at December 31, 2015. The Corporation had no reserve for contingent income tax liabilities recorded at December 31, 2015 and 2014. The tax periods open to examination by the Internal Revenue Service include the years ended December 31, 2015, 2014, 2013 and 2012.

Upon the Corporation's acquisition of Monarch, there was an ownership change within the meaning of Internal Revenue Code Section 382. At April 1, 2015, Monarch had $22.6 million in gross federal net operating loss carryforwards that expire between 2028-2034, which the Corporation expects to utilize. The Corporation expects to utilize these net operating losses, in part, as Monarch was in a net unrealized built-in gain position as of the acquisition date. The Corporation had remaining gross federal net operating loss carryforwards of $20.4 million at December 31, 2015.