INCOME TAXES

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



	2012			2011			2010
Current tax expense
Federal	$	85,875		$	108,639		$	127,025
State	9,212			23,101			24,868
Total current tax expense	95,087			131,740			151,893
Deferred tax benefit
Federal	(27,344		)	(12,127		)	(33,333		)
State	(7,921		)	(4,510		)	(8,042		)
Total deferred tax benefit	(35,265		)	(16,637		)	(41,375		)
Total income tax expense	$	59,822		$	115,103		$	110,518

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:



	2012			2011			2010
Income taxes at statutory rates	$	67,959		$	108,546		$	106,247
Increase (reduction) in income taxes resulting from:
Nontaxable income on loans, leases and investments, net of nondeductible expenses	(1,309		)	(1,481		)	(1,571		)
State and local income taxes, including change in valuation allowance, net of federal income tax benefit	839			12,084			10,937
Tax credits	(7,279		)	(5,166		)	(4,141		)
Other, net	(388		)	1,120			(954		)
Total income tax expense	$	59,822		$	115,103		$	110,518

The lower effective tax rates for 2012 result from recognition of a $6,449 income tax expense reduction resulting from the favorable outcome of state tax audits for the period 2008 through 2010, net of additional federal taxes.

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



	2012		2011
Allowance for loan and lease losses	$	124,928	$	105,788
Pension liability	46,178		25,112
Executive separation from service agreements	10,123		10,019
State operating loss carryforward	652		1,350
Unrealized loss on cash flow hedge	4,106		4,231
Other	19,465		17,638
Gross deferred tax asset	205,452		164,138
Less valuation allowance	—		73
Deferred tax asset	205,452		164,065
Accelerated depreciation	12,465		14,494
Lease financing activities	10,366		11,334
Net unrealized gains on securities included in accumulated other comprehensive loss	13,292		10,450
Net deferred loan fees and costs	3,714		3,420
Intangible asset	11,897		11,681
Gain on FDIC-assisted transactions, deferred for tax purposes	29,694		34,208
Other	5,373		5,079
Deferred tax liability	86,801		90,666
Net deferred tax asset	$	118,651	$	73,399

No valuation allowance was necessary as of December 31, 2012, to reduce BancShares’ gross state deferred tax asset to the amount that is more likely than not to be realized. A valuation allowance of $73 was recorded at December 31, 2011.

BancShares and its subsidiaries' federal income tax returns for 2009 through 2011 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 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, 2012, and 2011, and changes in the liability were not material during 2012, 2011 and 2010. BancShares does not expect the liability for unrecognized tax benefits to change significantly during 2013. BancShares recognizes interest and penalties, if any, related to income tax matters in income tax expense, and the amounts recognized during 2012, 2011 and 2010 were not material.