Note 14 – Income Taxes

The income tax provision included in the statements of income was as follows for the years ended December 31, 2014, 2013 and 2012 ($ in thousands):

Current	2014		2013		2012
Federal	$	17,761	$	14,537	$	48,186
State		2,068		1,237		2,366
Deferred
Federal		16,256		18,394		(7,349	)
State		2,444		2,769		(1,103	)
Income tax provision	$	38,529	$	36,937	$	42,100

For the years ended December 31, 2014, 2013 and 2012, the income tax provision differs from the amount computed by applying the statutory federal income tax rate of 35% to income before income taxes as a result of the following ($ in thousands):

	2014			2013			2012
Income tax computed at statutory tax rate	$	56,732		$	53,899		$	55,784
Tax exempt interest		(5,612	)		(5,222	)		(5,150	)
Nondeductible interest expense		107			121			144
State income taxes, net		2,933			2,604			821
Income tax credits		(15,212	)		(15,755	)		(9,255	)
Other		(419	)		1,290			(244	)
Income tax provision	$	38,529		$	36,937		$	42,100

Temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities gave rise to the following net deferred tax assets at December 31, 2014 and 2013, which are included in other assets ($ in thousands):

Deferred tax assets:	2014			2013
Loan purchase accounting	$	38,471		$	63,048
Other real estate		36,086			47,981
Allowance for loan losses		31,241			29,102
Deferred compensation		20,825			20,000
Realized built in losses		15,907			9,182
Securities		15,443			17,741
Pension and other postretirement benefit plans		14,904			7,511
Nonaccrual loans		3,372			4,452
Stock-based compensation		3,077			3,357
Other		17,833			14,771
Gross deferred tax asset		197,159			217,145
Valuation allowance		(8,650	)		(16,000	)
Deferred tax asset net of valuation allowance		188,509			201,145

Deferred tax liabilities:
Goodwill and other identifiable intangibles		28,010			29,809
Premises and equipment		20,813			21,543
Unrealized gains on securities available for sale		8,627			1,969
Mortgage servicing rights		7,747			8,145
Securities		1,353			1,270
Leases		625			3,290
Other		3,900			4,642
Gross deferred tax liability		71,075			70,668
Net deferred tax asset	$	117,434		$	130,477

Trustmark has evaluated the need for a valuation allowance and, based on the weight of the available evidence, has determined that it is more likely than not that a portion of deferred tax assets will not be realized due to limitations on the deductibility of built in losses in future years. A valuation allowance, which was created as a result of the BancTrust merger in 2013 and reduced in 2014 as a result of measurement period adjustments, has been established to reduce deferred tax assets to the amount that will more likely than not be realized in future years. For additional information regarding the merger with BancTrust and the measurement period adjustments recorded, see Note 2 – Business Combinations located elsewhere in this report.

The following table provides a summary of the changes during the 2014 calendar year in the amount of unrecognized tax benefits that are included in other liabilities in the consolidated balance sheet ($ in thousands):

Balance at January 1, 2014	$	1,779
Increases due to tax positions taken during the current year		670
Increases due to tax positions taken during a prior year		60
Decreases due to the lapse of applicable statute of limitations during the current year		(306	)
Decreases due to settlements with taxing authorities during the current year		(43	)
Balance at December 31, 2014	$	2,160

Accrued interest, net of federal benefit, at December 31, 2014	$	437

Unrecognized tax benefits that would impact the effective tax rate, if recognized, at December 31, 2014	$	1,603

Interest and penalties related to unrecognized tax benefits, if any, are recorded in income tax expense. With limited exception, Trustmark is no longer subject to U.S. federal, state and local audits by tax authorities for 2008 and earlier tax years. Trustmark does not anticipate a significant change to the total amount of unrecognized tax benefits within the next twelve months.