NOTE 14. INCOME TAXES

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


	For the Years Ended December 31,
	2013		2012		2011
	(Dollars in Thousands)
Current	$	5,742	$	4,760	$	2,506
Use of operating loss carryforward		–		–		2,958
Deferred		3,543		2,525		5,092

	$	9,285	$	7,285	$	10,556

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,
	2013			2012			2011
	(Dollars in Thousands)
Tax at federal income tax rate	$	10,256		$	7,602		$	11,077
Change resulting from:
Tax-exempt interest		(841	)		(675	)		(585	)
Increase in cash value of bank owned life insurance		(446	)		(34	)		–
Other		316			392			64

Provision for income taxes	$	9,285		$	7,285		$	10,556

Net deferred income tax assets of $16,451,000 and net deferred income tax liabilities of $9,533,000 at December 31, 2013 and 2012, respectively, are included in other assets (liabilities). The components of deferred income taxes are as follows:


	December 31,
	2013		2012
	(Dollars in Thousands)

Deferred tax assets:
Allowance for loan losses	$	7,832	$	8,258
Deferred compensation		550		276
Deferred gain on interest rate swap		573		686
Unrealized loss on interest rate swap		130		1,042
Unrealized loss on securities available for sale		911		–
Nonaccrual interest		323		891
Purchase accounting adjustments		26,408		–
Other real estate owned		1,855		3,803
Capitalized costs, accrued expenses and other		1,976		1,155

		40,558		16,111


Deferred tax liabilities:
Depreciation and amortization		4,355		4,758
Intangible assets		–		60
Purchase accounting adjustments		7,534		–
Deferred gain on FDIC-assisted transactions		12,218		17,256
Unrealized gain on securities available for sale		–		3,570

		24,107		25,644


Net deferred tax asset (liability)	$	16,451	$	(9,533	)