NOTE 16. INCOME TAXES

The income tax expense in the consolidated statements of income consists of the following:

	For the Years Ended December 31,
	2015		2014		2013
	(Dollars in Thousands)

Current – federal	$	15,215	$	10,499	$	5,237
Current - state		1,026		467		505
Deferred - federal		(344)		6,516		3,543
	$	15,897	$	17,482	$	9,285

The Company’s income tax expense differs from the amounts computed by applying the federal income tax statutory rates to income before income taxes. A reconciliation of the differences is as follows:

	For the Years Ended December 31,
	2015		2014		2013
	(Dollars in Thousands)
Tax at federal income tax rate	$	19,860	$	19,672	$	10,256
Change resulting from:
Tax-exempt interest		(2,490)		(1,647)		(841)
Increase in cash value of bank owned life insurance		(484)		(568)		(446)
State income tax, net of federal benefit		667		304		328
Other		(1,656)		(279)		(12)
Provision for income taxes	$	15,897	$	17,482	$	9,285

Net deferred income tax assets of $19,459,000 and $17,784,000 at December 31, 2015 and 2014, respectively, are included in other assets. The components of deferred income taxes are as follows:

	December 31,
	2015		2014
	(Dollars in Thousands)
Deferred tax assets:
Allowance for loan losses	$	7,372	$	7,405
Deferred compensation		1,202		787
Deferred gain on interest rate swap		381		477
Unrealized loss on interest rate swap		504		460
Nonaccrual interest		49		153
Purchase accounting adjustments		10,825		13,241
Goodwill and intangible assets		9,357		9,565
Other real estate owned		8,597		8,982
Net operating loss tax carryforward		11,179		12,146
Capitalized costs, accrued expenses and other		200		1,469
		49,666		54,685
Deferred tax liabilities:
Depreciation and amortization		5,591		4,821
Mortgage servicing rights		715		539
Subordinated debentures		7,732		7,159
FDIC-assisted transaction adjustments		14,446		21,372
Unrealized gain on securities available for sale		1,723		3,010
		30,207		36,901
Net deferred tax asset	$	19,459	$	17,784

At December 31, 2015, the Company had federal net operating loss carryforwards of approximately $31.90 million which expire at various dates from 2028 to 2033. At December 31, 2014, the Company had federal net operating loss carryforwards of approximately $34.0 million which expire at various dates from 2028 to 2033. Deferred tax assets are recognized for net operating losses because the benefit is more likely than not to be realized.

The Company did not record any interest and penalties related to income taxes for the years ended December 31, 2015, 2014 and 2013, and the Company did not have any amount accrued for interest and penalties at December 31, 2015, 2014 and 2013.

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of the various states. The Company is no longer subject to examination by taxing authorities for years before 2012.