(14) Income Taxes

An analysis of the difference between the statutory and effective tax rates for the three months ended March 31, 2014 and 2013 follows:

	Three months ended March 31,
	2014		2013
U.S. federal statutory tax rate	35.0	%	35.0	%
Tax exempt interest income	(1.7	)	(2.1	)
Tax credits	(1.6	)	(0.7	)
Cash surrender value of life insurance	(2.0	)	(2.4	)
State income taxes	1.0		1.0
Other, net	0.1		—
Effective tax rate	30.8	%	30.8	%

US GAAP provides guidance on financial statement recognition and measurement of tax positions taken, or expected to be taken, in tax returns. As of March 31, 2014 and December 31, 2013, the gross amount of unrecognized tax benefits was $43,000 and $41,000, respectively. If recognized, the tax benefits would reduce tax expense and accordingly, increase net income. The amount of unrecognized tax benefits may increase or decrease in the future for various reasons including adding amounts for current tax year positions, expiration of open income tax returns due to statutes of limitation, changes in management’s judgment about the level of uncertainty, status of examination, litigation and legislative activity and the addition or elimination of uncertain tax positions.

Bancorp is currently under IRS examination of its 2011 corporate income tax return. Management does not expect that the results of the examination will have a material effect on our financial condition. While management believes tax positions are appropriate, the IRS could challenge Bancorp’s positions as a part of this examination. Federal and state income tax returns are subject to examination for the tax return years after 2009.

Bancorp’s policy is to report interest and penalties, if any, related to unrecognized tax benefits in income tax expense. As of March 31, 2014 and December 31, 2013, the amount accrued for the potential payment of interest and penalties was $3,000 and $2,000, respectively.