INCOME TAXES:

Income tax expense is summarized as follows:



(Dollar amounts in thousands)	2016		2015			2014
Federal:
Currently payable	$	15,514	$	9,890		$	9,388
Deferred	1,326		(774		)	2,120
	16,840		9,116			11,508
State:
Currently payable	2,857		1,426			1,928
Deferred	186		(150		)	753
	3,043		1,276			2,681
TOTAL	$	19,883	$	10,392		$	14,189

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)	2016			2015			2014
Federal income taxes computed at the statutory rate	$	20,403		$	14,206		$	16,786
Add (deduct) tax effect of:
Tax exempt income	(3,992		)	(4,047		)	(4,016		)
Non-deductible insurance brokerage goodwill	1,797			—			—
ESOP dividend deduction	(47		)	(164		)	(284		)
State tax, net of federal benefit	1,978			829			1,743
Affordable housing credits	(148		)	(148		)	(148		)
Other, net	(108		)	(284		)	108
TOTAL	$	19,883		$	10,392		$	14,189

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2016 and 2015, are as follows:



(Dollar amounts in thousands)	2016			2015
Deferred tax assets:
Other than temporary impairment	$	5,397		$	5,411
Net unrealized losses on retirement plans	8,576			12,007
Net unrealized losses on securities available for sale	719			—
Loan loss provisions	7,318			7,755
Deferred compensation	5,881			6,257
Compensated absences	832			917
Post-retirement benefits	2,043			2,026
Deferred loss on acquisition	1,111			1,177
Other	3,119			2,887
GROSS DEFERRED ASSETS	34,996			38,437
Deferred tax liabilities:
Net unrealized gains on securities available-for-sale	—			(5,234		)
Depreciation	(2,778		)	(2,632		)
Mortgage servicing rights	(486		)	(539		)
Pensions	(65		)	(424		)
Intangibles	(3,015		)	(2,283		)
Other	(3,180		)	(2,863		)
GROSS DEFERRED LIABILITIES	(9,524		)	(13,975		)
NET DEFERRED TAX ASSETS	$	25,472		$	24,462

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



(Dollar amounts in thousands)	2016			2015			2014
Balance at January 1	$	513		$	589		$	676
Additions based on tax positions related to the current year	288			68			72
Additions based on tax positions related to prior years	—			—			—
Reductions due to the statute of limitations	(103		)	(144		)	(159		)
Balance at December 31	$	698		$	513		$	589

Of this total, $698 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, 2016, 2015 and 2014 was an expense increase of $4, and a decrease of $17 and $21, respectively. The amount accrued for interest and penalties at December 31, 2016, 2015 and 2014 was $31, $27 and $44, 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 2013.