Note 14. Income Taxes

The components of income taxes consist of:

	Years Ended December 31,
	2012		2011		2010
	(dollars in thousands)
Current	$	1,926	$	2,194	$	7,353
Deferred	8,571		12,776		2,111
Total income tax (benefit) expense	$	10,497	$	14,970	$	9,464

A reconciliation of federal and state income taxes at statutory rates to the income taxes included in the statements of income is as follows:

	Years Ended December 31,
	2012		2011		2010
	% of		% of		% of
	Pretax		Pretax		Pretax
	Income		Income		Loss

Income tax (benefit) at statutory rate	35.0	%	35.0	%	35.0	%
Effect of:
Tax-exempt interest, net	(4.5	)%	(2.6	)%	(3.7	)%
State income taxes, net	3.5	%	2.1	%	2.0	%
Income on bank owned life insurance	(1.8	)%	(1.0	)%	(1.9	)%
ESOP dividends	(0.2	)%	(0.1	)%	(0.2	)%
Other, net	(0.1	)%	—	%	(2.3	)%
	31.9	%	33.4	%	28.9	%

Net deferred taxes at December 31, 2012 and 2011 in the accompanying Consolidated Balance Sheets, include the following amounts of deferred tax assets and liabilities:

	2012			2011
	(dollars in thousands)
Deferred tax assets:
Allowance for loan losses	$	19,597		$	23,881
Stock-based compensation	1,183			795
Loan adjustments	396			131
Deferred compensation	1,993			1,956
Accrued vacation	576			511
Employee costs	616			385
Other	1,423			1,448
	$	25,784		$	29,107

Deferred tax liabilities:
Investment securities:
Unrealized gains on securities available for sale	$	(9,479	)	$	(9,187	)
Other	(2,273		)	(2,004		)
Basis in premises and equipment	(2,215		)	(3,170		)
Mortgage servicing assets	(2,159		)	(2,232		)
Basis in core deposit and customer intangibles	(5,185		)	(6,538		)
Deferred loan origination costs	(303		)	(285		)
	$	(21,614	)	$	(23,416	)
Net operating loss carryforward, net of valuation allowance	35,203			42,545
Net deferred tax asset	$	39,373		$	48,236

At December 31, 2012 and December 31, 2011, the Company had federal and Illinois net operating loss carryforwards of $35.2 million and $42.5 million, respectively, which are available to offset future taxable income. These net operating loss carryforwards will expire in 2030.

At December 31, 2012, the Company also had Indiana and Florida net operating loss carryforwards of $1.8 million, which will begin to expire in 2030. Due to the uncertainty as to whether we will be able to realize the Indiana and Florida carryforwards, the Company has a full valuation allowance of $1.8 million related to these net operating loss carryforwards.

Management believes that it is more likely than not that the other deferred tax assets included in the accompanying Consolidated Balance Sheets will be fully realized. We have determined that no valuation allowance is required for any other deferred tax assets as of December 31, 2012, although there is no guarantee that those assets will be recognizable in future periods.