NOTE 16. INCOME TAXES

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


	For the Years Ended December 31,
	2014		2013		2012
	(Dollars in Thousands)
Current – federal	$	10,499	$	5,237	$	4,732
Current - state		467		505		28
Deferred - federal		6,516		3,543		2,525

	$	17,482	$	9,285	$	7,285

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,
		2014		2013		2012
		(Dollars in Thousands)
Tax at federal income tax rate	$	19,672	$	10,256	$	7,602
Change resulting from:
Tax-exempt interest		(1,647)		(841)		(675)
Increase in cash value of bank owned life insurance		(568)		(446)		(34)
Other		25		316		392

Provision for income taxes	$	17,482	$	9,285	$	7,285

Net deferred income tax assets of $17,784,000 and $16,451,000 at December 31, 2014 and 2013, respectively, are included in other assets. The components of deferred income taxes are as follows:


	December 31,
	2014		2013
	(Dollars in Thousands)
Deferred tax assets:
Allowance for loan losses	$	7,405	$	7,832
Deferred compensation		787		550
Deferred gain on interest rate swap		477		573
Unrealized loss on interest rate swap		460		130
Unrealized loss on securities available for sale		-		911
Nonaccrual interest		153		323
Purchase accounting adjustments		12,380		20,334
Other real estate owned		7,706		1,855
Net operating loss tax carryforward		12,146		6,074
Capitalized costs, accrued expenses and other		871		1,976

		42,385		40,558

Deferred tax liabilities:
Depreciation and amortization		4,821		4,355
Intangible assets		802		-
Purchase accounting adjustments		7,159		7,534
Deferred gain on FDIC-assisted transactions		8,809		12,218
Unrealized gain on securities available for sale		3,010		-

		24,601		24,107

Net deferred tax asset	$	17,784	$	16,451

At December 31, 2014, the Company had federal net operating loss carryforwards of approximately $34.7 million which expire at various dates from 2029 to 2033. At December 31, 2013, the Company had federal net operating loss carryforwards of approximately $17.4 million which expire at various dates from 2029 to 2032. 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, 2014, 2013 and 2012, and the Company did not have any amount accrued for interest and penalties at December 31, 2014, 2013 and 2012.

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 2011.