(13) INCOME TAXES

Total income taxes for the years ended December 31, 2013, 2012 and 2011 were allocated as follows:


	2013	2012	2011
	(In thousands)
Income tax expense	$ 37,551	$ 33,252	$ 4,475
Shareholders' equity for other comprehensive income	(13,249)	(3,943)	7,600
Shareholders' equity for stock option plans	(139)	32	(7)
Total	$ 24,163	$ 29,341	$ 12,068

The components of income tax expense attributable to operations were as follows for the years ended December 31, 2013, 2012 and 2011:


	2013	2012	2011
Current:	(In thousands)
Federal	$ 32,729	$ 34,316	$ 5,643
State	1,570	3,389	5,400
Deferred:
Federal	1,774	(4,964)	(1,626)
State	1,478	511	(4,942)
Total	$ 37,551	$ 33,252	$ 4,475

During 2013, the Company recognized certain tax benefits related to stock options in the amount of approximately $139,000. Such benefits were recorded as a reduction of income taxes payable and an increase in capital surplus.

During 2013, the Company reversed the deferred tax asset associated with stock options expiring during 2013 in the amount of $1.1 million. The reversal was recorded as a reduction of deferred tax assets and a reduction in capital surplus.

Income tax expense 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:


	2013	2012	2011
	(In thousands)
Tax expense at statutory rates	$ 46,083	$ 41,141	$ 14,715
Increase (decrease) in taxes resulting from:
State income taxes, net of federal tax benefit	1,926	2,453	266
Tax-exempt interest revenue	(7,423)	(7,789)	(7,881)
Tax-exempt earnings on life insurance	(2,889)	(2,790)	(2,647)
Deductible dividends paid on 401(k) plan	(187)	(100)	(331)
Other, net	41	337	353
Total	$ 37,551	$ 33,252	$ 4,475

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2013 and 2012 were as follows:


	2013	2012
Deferred tax assets:	(In thousands)
Loans, principally due to allowance
for credit losses	$ 58,003	$ 62,206
Other real estate owned	6,799	13,027
Mark to market - securities	4,164	4,160
Accrued liabilities, principally due to
compensation arrangements and vacation accruals	13,085	15,897
Other	2,993	3,884
Investments, principally due to interest income recognition	-	516
State tax credits (net of federal benefit)	-	428
Unrecognized pension expense	20,997	31,374
Total gross deferred tax assets	106,041	131,492
Less: valuation allowance	-	-
Deferred tax assets	$ 106,041	$ 131,492
Deferred tax liabilities:
Lease transactions	$ 29,997	$ 34,532
Employment benefits	12,483	22,392
Premises and equipment, principally due
to differences in depreciation	23,488	26,824
Mortgage servicing rights	20,679	14,313
Intangible assets	10,654	10,439
Investments, principally due to interest income recognition	133	-
Deferred loan points	2,806	2,650
Other assets, principally due to expense recognition	1,033	767
Unrealized net gains on available-for-sale securities	2,289	26,066
Total gross deferred tax liabilities	103,562	137,983
Net deferred tax assets (liabilities)	$ 2,479	$ (6,491)

As of December 31, 2013, the Company had utilized the deferred state tax asset resulting from state tax net operating losses carryforwards.

Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences existing at December 31, 2013.

The following table presents the activity in unrecognized tax benefits for 2013, 2012 and 2011:


	2013	2012	2011
	(In thousands)
Unrecognized tax benefit, January 1	$ 1,571	$ 1,102	$ 355
Gross increases - tax positions in prior period	-	199	873
Gross decreases - tax positions in prior period	(1,571)	-	(355)
Gross increases - tax positions in current period	-	270	229
Settlements	-	-	-
Lapse of statute of limitations	-	-	-
Unrecognized tax benefit, December 31	$ -	$ 1,571	$ 1,102

The balance of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $1.6 million and $1.1 million at December 31, 2012 and 2011, respectively. There were no unrecognized tax benefits at December 31, 2013.

The Company recognizes accrued interest related to unrecognized tax benefits and penalties as a component of other noninterest expense. The Company accrued interest related to the uncertain tax benefits noted above of approximately $329,000 and $26,000 during 2012 and 2011, respectively, with no interest accrued in 2013. The Company recognized a total accrued interest liability of approximately $0, $560,000 and $231,000, at December 31, 2013, 2012 and 2011, respectively.

During 2013, a $1.6 million tax benefit was recorded as a result of the resolution of an uncertain tax position with the remainder of the settlement pertaining to accrued interest and penalties. The uncertain tax position related to the review of the tax treatment of items during the tax years 2007 through 2009. The review was resolved in our favor during the third quarter of 2013, resulting in the reversal of the uncertain tax position reserve for the matter.

Management does not expect that unrecognized tax benefits will significantly increase or decrease within the next 12 months.

The Company is subject to taxation in the United States and various states and local jurisdictions. The Company files a consolidated United States federal return. Based on the laws of the applicable state where the Company conducts business operations, the Company and its applicable subsidiaries either file a consolidated, combined or separate return. The tax years that remain open for examination for the Company’s major jurisdictions of the United States - Mississippi, Arkansas, Tennessee, Alabama, Louisiana and Missouri - are 2010, 2011 and 2012.