INCOME TAXES

At December 31, income tax expense consisted of the following:



	2011			2010			2009
Current tax expense
Federal	$	108,639		$	127,025		$	25,668
State	23,101			24,868			5,328
Total current tax expense	131,740			151,893			30,996
Deferred tax expense (benefit)
Federal	(12,127		)	(33,333		)	30,356
State	(4,510		)	(8,042		)	5,416
Total deferred tax expense (benefit)	(16,637		)	(41,375		)	35,772
Total income tax expense	$	115,103		$	110,518		$	66,768

Income tax expense differed from the amounts computed by applying the federal income tax rate of 35 percent to pretax income as a result of the following:



	2011			2010			2009
Income taxes at statutory rates	$	108,546		$	106,247		$	64,085
Increase (reduction) in income taxes resulting from:
Nontaxable income on loans, leases and investments, net of nondeductible expenses	(1,481		)	(1,571		)	(1,556		)
State and local income taxes, including change in valuation allowance, net of federal income tax benefit	12,084			10,937			6,984
Tax credits	(5,166		)	(4,141		)	(2,735		)
Other, net	1,120			(954		)	(10		)
Total income tax expense	$	115,103		$	110,518		$	66,768

The net deferred tax asset included the following components at December 31:



	2011		2010
Allowance for loan and lease losses	$	105,390	$	89,193
Pension liability (asset)	25,112		(939		)
Executive separation from service agreements	10,019		9,017
State operating loss carryforward	2,426		2,544
Unrealized loss on cash flow hedge	4,231		3,748
Other	15,771		13,273
Gross deferred tax asset	162,949		116,836
Less valuation allowance	84		85
Deferred tax asset	162,865		116,751
Accelerated depreciation	14,954		13,441
Lease financing activities	11,334		9,371
Net unrealized gains on securities included in accumulated other comprehensive loss	10,450		9,218
Net deferred loan fees and costs	3,313		3,970
Intangible asset	11,681		11,648
Gain on FDIC-assisted transactions, deferred for tax purposes	34,728		28,461
Other	3,952		4,263
Deferred tax liability	90,412		80,372
Net deferred tax asset	$	72,453	$	36,379

The valuation allowance necessary to reduce BancShares’ gross state deferred tax asset to the amount that is more likely than not to be realized was $84 and $85 at December 31, 2011 and 2010, respectively.

BancShares and its subsidiaries' 2009 federal consolidated income tax return is currently under examination by the IRS, and federal income tax returns for 2008 through 2010 remain open for examination. Generally, the state jurisdictions in which BancShares files income tax returns are subject to examination for a period up to four years after returns are filed.

Under US GAAP, the benefit of a position taken or expected to be taken in a tax return should be recognized when it is more likely than not that the position will be sustained based on its technical merit. The liability for unrecognized tax benefits was not material at December 31, 2011 and 2010, and changes in the liability were not material during 2011, 2010 and 2009. BancShares does not expect the liability for unrecognized tax benefits to change significantly during 2012. BancShares recognizes interest and penalties, if any, related to income tax matters in income tax expense, and the amounts recognized during 2011, 2010 and 2009 were not material.