INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2011

Total income taxes for the years ended December 31, 2011, 2010 and 2009 were allocated as follows:

	2011			2010			2009
	(In thousands)
Income tax expense (benefit)	$	4,475		$	(8,705	)	$	30,105
Shareholders' equity for other comprehensive income		7,600			(3,763	)		11,469
Shareholders' equity for stock option plans		(7	)		(44	)		(500	)
Total	$	12,068		$	(12,512	)	$	41,074

Components of Income Tax (Benefit) Expense

The components of income tax expense (benefit) attributable to operations were as follows for the years ended December 31, 2011, 2010 and 2009:

	2011			2010			2009
Current:	(In thousands)
Federal	$	5,643		$	8,865		$	35,936
State		5,400			(1,520	)		3,527
Deferred:
Federal		(1,626	)		(13,848	)		(8,302	)
State		(4,942	)		(2,202	)		(1,056	)
Total	$	4,475		$	(8,705	)	$	30,105

Income Tax Reconciliation

Income tax expense (benefit) differed from the amount computed by applying the U.S. federal income tax rate of 35% to income before income taxes resulting from the following:

	2011			2010			2009
	(In thousands)
Tax expense at statutory rates	$	14,715		$	4,983		$	39,492
Increase (decrease) in taxes resulting from:
State income taxes, net of federal tax benefit		266			(2,419	)		1,606
Tax-exempt interest revenue		(7,881	)		(6,605	)		(6,105	)
Tax-exempt earnings on life insurance		(2,647	)		(2,659	)		(2,970	)
Deductible dividends paid on 401(k) plan		(331	)		(1,972	)		(1,875	)
Other, net		353			(33	)		(43	)
Total	$	4,475		$	(8,705	)	$	30,105

Deferred Tax Assets and Deferred Tax Liabilities

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2011 and 2010 were as follows:

	2011				2010*
Deferred tax assets:	(In thousands)
Loans, principally due to allowance for credit losses	$	73,911		$	75,514
Other real estate owned		10,429			5,681
Mark to market - securities		4,165			4,216
Accrued liabilities, principally due to compensation arrangements and vacation accruals		10,681			9,353
Other		312			1,760
State tax credits (net of federal benefit)		1,040			-
Unrecognized pension expense		26,428			17,262
Total gross deferred tax assets		126,966			113,786
Less: valuation allowance		-			-
Deferred tax assets	$	126,966		$	113,786
Deferred tax liabilities:
Lease transactions	$	37,509		$	32,809
Employment benefits		26,991			29,514
Premises and equipment, principally due to differences in depreciation		27,221			24,033
Mortgage servicing rights		11,405			14,785
Intangible assets		10,336			10,080
Investments, principally due to interest income recognition		147			4,069
Deferred loan points		2,656			2,821
Other assets, principally due to expense recognition		525			1,233
Unrealized net losses on available-for-sale securities		25,064			8,297
Total gross deferred tax liabilities		141,854			127,641
Net deferred tax liabilities	$	(14,888	)	$	(13,855	)
*Certain 2010 amounts have been reclassified to conform with the 2011 presentation.

Activity in Unrecognized Tax Benefits

The following table presents the activity in unrecognized tax benefits for 2011, 2010 and 2009:

	2011			2010		2009
	(In thousands)
Unrecognized tax benefit, January 1	$	355		$	355	$	355
Gross increases - tax positions in prior period		873			-		-
Gross decreases - tax positions in prior period		(355	)		-		-
Gross increases - tax positions in current period		229			-		-
Settlements		-			-		-
Lapse of statute of limitations		-			-		-
Unrecognized tax benefit, December 31	$	1,102		$	355	$	355

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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