INCOME TAXES:

Income tax expense is summarized as follows:



(Dollar amounts in thousands)	2014		2013			2012
Federal:
Currently payable	$	9,388	$	10,177		$	12,074
Deferred	2,120		740			(455		)
	11,508		10,917			11,619
State:
Currently payable	1,928		3,629			1,887
Deferred	753		(779		)	312
	2,681		2,850			2,199
TOTAL	$	14,189	$	13,767		$	13,818

The reconciliation of income tax expense with the amount computed by applying the statutory federal income tax rate of 35% to income before income taxes is summarized as follows:



(Dollar amounts in thousands)	2014			2013			2012
Federal income taxes computed at the statutory rate	$	16,786		$	15,856		$	16,320
Add (deduct) tax effect of:
Tax exempt income	(4,016		)	(3,760		)	(3,864		)
ESOP dividend deduction	(284		)	(105		)	(258		)
State tax, net of federal benefit	1,743			1,852			1,444
Affordable housing credits	(148		)	(148		)	(148		)
Other, net	108			72			324
TOTAL	$	14,189		$	13,767		$	13,818

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



(Dollar amounts in thousands)	2014			2013
Deferred tax assets:
Other than temporary impairment	$	5,417		$	5,820
Net unrealized losses on retirement plans	16,068			6,815
Net unrealized losses on securities available for sale	—			2,701
Loan loss provisions	7,232			7,845
Deferred compensation	6,637			7,118
Compensated absences	894			857
Post-retirement benefits	2,014			2,045
Deferred loss on acquisition	1,377			929
Other	2,185			2,771
GROSS DEFERRED ASSETS	41,824			36,901
Deferred tax liabilities:
Net unrealized gains on securities available-for-sale	(5,831		)	—
Depreciation	(2,423		)	(2,528		)
Mortgage servicing rights	(561		)	(752		)
Pensions	(2,182		)	(1,818		)
Intangibles	(1,652		)	(1,086		)
Other	(2,173		)	(1,563		)
GROSS DEFERRED LIABILITIES	(14,822		)	(7,747		)
NET DEFERRED TAX ASSETS (LIABILITIES)	$	27,002		$	29,154

Unrecognized Tax Benefits — A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



(Dollar amounts in thousands)	2014			2013			2012
Balance at January 1	$	676		$	777		$	862
Additions based on tax positions related to the current year	72			65			86
Additions based on tax positions related to prior years	—			—			—
Reductions due to the statute of limitations	(159		)	(166		)	(171		)
Balance at December 31	$	589		$	676		$	777

Of this total, $589 represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. The Corporation does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next 12 months.

The total amount of interest and penalties recorded in the income statement for the years ended December 31, 2014, 2013 and 2012 was an expense decrease of $21, $31 and $2, respectively. The amount accrued for interest and penalties at December 31, 2014, 2013 and 2012 was $44, $65 and $96, respectively.

The Corporation and its subsidiaries are subject to U.S. federal income tax as well as income tax of the states of Indiana and Illinois. The Corporation is no longer subject to examination by taxing authorities for years before 2011.