INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2013

Components of Income Tax Expense (Benefit)

Income tax expense for the years ended December 31, 2013, 2012 and 2011 consisted of the following:

(dollars in thousands)	2013		2012			2011
Current federal	$	17,181	$	15,181		$	15,845

Deferred federal		183		1,175			(1,863	)

Current state		1,387		877			1,413

Deferred state		808		(51	)		(677	)

Total income tax expense	$	19,559	$	17,182		$	14,718

Differences In Taxes From Continuing Operations

The differences between financial statement tax expense and amounts computed by applying the statutory federal income tax rate of 35% for 2013, 2012 and 2011 to income before income taxes were as follows:

(dollars in thousands)	2013			2012			2011
Income taxes at statutory federal rate of 35%	$	20,439		$	18,402		$	15,883
Increase (decrease) in taxes resulting from:
Tax exempt income		(1,222	)		(1,122	)		(1,376	)
Nondeductible expense		180			182			213
State income tax, net of federal tax effect		1,396			554			490
Captive insurance premium income		(391	)		0			0
Tax credits		(243	)		(253	)		(153	)
Bank owned life insurance		(578	)		(340	)		(348	)
Reserve for unrecognized tax benefits		(25	)		(45	)		22
Other		3			(196	)		(13	)
Total income tax expense	$	19,559		$	17,182		$	14,718

Deferred Tax Assets and Liabilities

The net deferred tax asset recorded in the consolidated balance sheets at December 31, 2013 and 2012 consisted of the following:

(dollars in thousands)	2013		2012
Deferred tax assets:
Bad debts	$	19,902	$	21,810
Pension and deferred compensation liability		1,215		916
Non-qualified stock options		638		581
Nonaccrual loan interest		1,760		1,700
Long-term incentive plan		1,605		1,038
Other		32		302
		25,152		26,347
Deferred tax liabilities:
Accretion		152		147
Depreciation		3,336		3,075
Loan servicing rights		1,080		1,223
State taxes		963		1,229
Deferred loan fees		63		46
Intangible assets		1,925		2,005
FHLB stock dividends		88		92
REIT spillover dividend		1,178		1,219
Prepaid expenses		895		848
		9,680		9,884
Valuation allowance		0		0
Net deferred tax asset	$	15,472	$	16,463

Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits:

(dollars in thousands)	2013			2012
Balance January 1,	$	89		$	134
Additions based on tax positions related to the current year		5			15
Additions for tax positions of prior years		0			0
Reductions for tax positions of prior years		0			0
Reductions due to the statute of limitations		(30	)		(60	)
Settlements		0			0
Balance at December 31,	$	64		$	89