(12) INCOME TAXES

The components of the Company's income tax expense (benefit) are as follows:


	Year Ended December 31,
	2011			2010			2009
	(Dollars in thousands)
Current taxes:
Federal	$	26,489		$	20,240		$	13,886
State		3,869			3,155			1,717
Deferred taxes.		(5,282	)		(58	)		467

Total income taxes	$	25,076		$	23,337		$	16,070

Income tax expense applicable to securities transactions approximated $560,000, $106,000 and $134,000 for the years ended December 31, 2011, 2010 and 2009, respectively.

A reconciliation of tax expense at the Federal statutory tax rate applied to income before taxes is presented in the following table:


	Year Ended December 31,
	2011			2010			2009
	(Dollars in thousands)
Tax expense at the Federal statutory tax rate	$	24,744		$	22,976		$	17,038
Increase (decrease) in tax expense from:
Tax-exempt income, net		(904	)		(648	)		(701	)
Modified endowment life contracts		(809	)		(705	)		(715	)
State tax expense, net of Federal tax benefit		3,916			3,098			1,737
Federal tax credits		(1,227	)		(1,914	)		(1,709	)
Other, net		(644	)		530			420

Total tax expense	$	25,076		$	23,337		$	16,070

The net deferred tax asset/(liability) consisted of the following:


	December 31,
	2011			2010
	(Dollars in thousands)
Provision for loan losses	$	14,252		$	13,014
Write-downs of other real estate owned		973			247
Deferred compensation		1,787			1,499
Stock based compensation		2,260			1,795
Other		910			625

Gross deferred tax assets		20,182			17,180

Unrealized net gains on securities		(5,085	)		(4,551	)
Premium on securities of banks acquired		(1,080	)		(1,308	)
Intangibles		(2,175	)		(1,936	)
Basis difference related to tax credits		(664	)		(3,875	)
Depreciation		(3,923	)		(3,326	)
Leveraged lease		(2,982	)		(3,350	)
Other		(1,336	)		(693	)

Gross deferred tax liabilities		(17,245	)		(19,039	)

Net deferred tax asset/( liability)	$	2,937		$	(1,859	)

The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if applicable, in income tax expense. During the years ended December 31, 2011, 2010 and 2009, the Company did not recognize or accrue any interest and penalties related to unrecognized tax benefits. Federal and various state income tax statutes dictate that tax returns filed in any of the previous three reporting periods remain open to examination which includes the years 2009 to 2011. The Company has no open examinations with either the Internal Revenue Service or any state agency.

Management performs an analysis of the Company's tax position annually and believes it is more likely than not that all of its tax positions will be utilized in future years.