Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

INCOME TAXES

(13)    INCOME TAXES

The provision for income taxes is comprised of the following components:

	For the Years Ended December 31,
	2011			2010			2009
	(Dollars In Thousands)
Current Expense
Federal	$	11,830		$	10,453		$	6,422
State		5,227			4,268			2,606
Total Current Expense		17,057			14,721			9,028
Deferred Expense (Benefit)
Federal		548			(2,223	)		(1,430	)
State		(457	)		(271	)		(851	)
Total Deferred Expense (Benefit)		91			(2,494	)		(2,281	)
TOTAL EXPENSE	$	17,148		$	12,227		$	6,747

The difference between the statutory federal income tax rate of 35% and the effective federal income tax rate is as follows:

	For the Years Ended December 31,
	2011			2010			2009
	(Dollars In Thousands)
Computed statutory federal income tax provision	$	21,904		$	18,364		$	10,408
State taxes, net of federal tax benefit		3,101			2,598			1,141
Nontaxable interest, net		(661	)		(564	)		(646	)
Tax credits		(6,238	)		(6,932	)		(4,550	)
Increase in cash surrender value of life insurance		(1,109	)		(1,117	)		(981	)
Merger and other related costs		—			—			1,627
Other, net		151			(122	)		(252	)
TOTAL EXPENSE	$	17,148		$	12,227		$	6,747

The effective tax rate for years ended December 31, 2011, 2010, and 2009 was 27.40%, 23.30%, and 22.69%, respectively.

The tax-effected components of the net deferred tax asset at December 31 were as follows:

	2011		2010
	(Dollars In Thousands)
Deferred Tax Assets
Allowance for loan losses	$	19,845	$	19,040
Other-than-temporary impairment on securities		4,403		4,304
Accrued expenses not deducted for tax purposes		6,181		5,359
Deferred gain on sale leaseback transaction		3,968		4,394
Derivatives fair value adjustment		6,767		4,282
Employee and director equity compensation		2,159		2,008
Amounts not yet recognized as a component of net periodic post retirement cost		870		777
Federal Home Loan Bank Borrowings fair value adjustment		318		534
Limited partnerships		50		47
New markets tax credit carry forward		—		327
Other		1,246		1,421
TOTAL	$	45,807	$	42,493
Deferred Tax Liabilities
Goodwill	$	11,499	$	10,238
Net unrealized gain on securities available for sale		3,762		4,232
Core deposit and other intangibles		3,499		4,143
Fixed assets		6,269		5,037
Loan basis difference fair value adjustment		1,326		1,826
Deferred loan fees, net		2,369		2,383
Mortgage servicing asset		429		633
Mark to market adjustment		60		490
Prepaid expenses		453		328
TOTAL	$	29,666	$	29,310
TOTAL NET DEFERRED TAX ASSET	$	16,141	$	13,183

The Company has determined that a valuation allowance is not required for any of its deferred tax assets since it is more likely than not that these assets will be realized principally through the utilization of carry-back provisions to taxable income on prior years and future reversals of existing taxable temporary differences and by offsetting other future taxable income.

Uncertainty in Income Taxes

The Company accounts for uncertainties in income taxes by providing a tax reserve for certain positions. The following is a reconciliation of the beginning and ending amount of unrecognized tax benefits:

Balance at December 31, 2009	$	175,000
Reduction of tax positions for prior years		—
Increase for current year tax positions		51,000
Balance at December 31, 2010	$	226,000
Reduction of tax positions for prior years		(115,000	)
Increase for current year tax positions		—
Balance at December 31, 2011	$	111,000

At December 31, 2011 and 2010, the Company’s unrecognized tax benefits are related to dividends received deductions on mutual bond funds, deductions of interest expense, and treatment of acquisition related costs in 2009, all of which, if recognized, would be recorded as a component of income tax expense therefore affecting the effective tax rate. The Company records interest and penalties related to uncertain tax positions in the provision for income taxes.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and in the states of Massachusetts, Rhode Island, New Hampshire, and Connecticut. The Company is subject to U.S. federal, state and local income tax examinations by tax authorities for the 2008 through 2010 tax years including any related income tax filings from its recent Bank acquisitions. The Company is carrying forward a credit relating to the New Markets Tax Credit program in the amount of $417,000 as of December 31, 2011. The credit will expire if unused within the next twenty years, however the Company anticipates utilizing the credit on the 2011 federal tax return.