(13) INCOME TAXES

Total income taxes for the years ended December 31, 2014, 2013 and 2012 were allocated as follows:


	2014	2013	2012
	(In thousands)
Income tax expense	$ 50,652	$ 37,551	$ 33,252
Shareholders' equity for other comprehensive income	(8,481)	(13,249)	(3,943)
Shareholders' equity for stock option plans	(1,856)	(139)	32
Total	$ 40,315	$ 24,163	$ 29,341

The components of income tax expense attributable to operations were as follows for the years ended December 31, 2014, 2013 and 2012:


	2014	2013	2012
Current:	(In thousands)
Federal	$ 51,014	$ 32,729	$ 34,316
State	7,201	1,570	3,389
Deferred:
Federal	(6,870)	1,774	(4,964)
State	(693)	1,478	511
Total	$ 50,652	$ 37,551	$ 33,252

During 2014 and 2013, the Company recognized certain tax benefits related to stock options in the amount of $1.9 million and approximately $139,000, respectively. Such benefits were recorded as a reduction of income taxes payable and an increase in capital surplus.

During 2014 and 2013, the Company reversed the deferred tax asset associated with stock options expiring during the current period in the amount of approximately $785,000 and $1.1 million, respectively. 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:


	2014	2013	2012
	(In thousands)
Tax expense at statutory rates	$ 58,591	$ 46,083	$ 41,141
Increase (decrease) in taxes resulting from:
State income taxes, net of federal tax benefit	4,230	1,926	2,453
Tax-exempt interest revenue	(7,371)	(7,423)	(7,789)
Tax-exempt earnings on life insurance	(3,076)	(2,889)	(2,790)
Deductible dividends paid on 401(k) plan	(458)	(187)	(100)
Tax credits	(1,771)	(578)	(466)
Other, net	507	619	803
Total	$ 50,652	$ 37,551	$ 33,252

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2014 and 2013 were as follows:


	2014	2013
Deferred tax assets:	(In thousands)
Loans, principally due to allowance for credit losses	$ 53,922	$ 58,003
Other real estate owned	4,605	6,799
Mark to market - securities	4,164	4,164
Accrued liabilities, principally due to
compensation arrangements and vacation accruals	17,877	13,085
Other	129	2,993
Unrecognized pension expense	39,428	20,997
Total gross deferred tax assets	120,125	106,041
Less: valuation allowance	-	-
Deferred tax assets	$ 120,125	$ 106,041
Deferred tax liabilities:
Lease transactions	$ 25,033	$ 29,997
Employment benefits	7,435	12,483
Premises and equipment, principally due
to differences in depreciation	21,845	23,488
Mortgage servicing rights	19,409	20,679
Intangible assets	11,024	10,654
Investments, principally due to interest income recognition	592	133
Deferred loan points	3,851	2,806
Other assets, principally due to expense recognition	959	1,033
Unrealized net gains on available-for-sale securities	12,393	2,289
Total gross deferred tax liabilities	102,541	103,562
Net deferred tax assets	$ 17,584	$ 2,479

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, 2014.

The following table presents the activity in unrecognized tax benefits for 2014, 2013 and 2012:


	2014	2013	2012
	(In thousands)
Unrecognized tax benefit, January 1	$ -	$ 1,571	$ 1,102
Gross increases - tax positions in prior period	-	-	199
Gross decreases - tax positions in prior period	-	(1,571)	-
Gross increases - tax positions in current period	-	-	270
Settlements	-	-	-
Lapse of statute of limitations	-	-	-
Unrecognized tax benefit, December 31	$ -	$ -	$ 1,571

The balance of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $1.6 million at 2012.

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 unrecognized tax benefits noted above of approximately $329,000 during 2012 with no interest accrued in 2014 or 2013. The Company recognized a total accrued interest liability of approximately $560,000 at December 31, 2012 with no accrued interest liability recognized at December 31, 2014 and 2013.

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 in 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 2011, 2012 and 2013.