12. INCOME TAXES

Income tax expense consists of the following.


	For the Year Ended December 31,
	2015		2014		2013
	(Dollars in thousands)
Current provision:
Federal	$	40,021	$	38,957	$	38,881
State		17,040		15,968		13,996

		57,061		54,925		52,877

Deferred provision/(benefit):
Federal		(3,443)		2,534		(3,260	)
State		(1,397)		1,317		(950	)

		(4,840)		3,851		(4,210	)

Total	$	52,221	$	58,776	$	48,667

Income tax asset consists of the following.


	As of December 31,
	2015		2014
	(Dollars in thousands)
Current:
Federal	$	7,414	$	4,522
State		2,998		4,437

		10,402		8,959

Deferred:
Federal		28,799		18,304
State		8,050		4,198

		36,849		22,502

Total	$	47,251	$	31,461

The components of the net deferred tax asset are as follows.


	As of December 31,
	2015		2014
	(Dollars in thousands)
Federal
Deferred tax assets:
Bad debt and credit loss deduction	$	23,180	$	23,805
Depreciation		121		—
Net operating loss carryforward		562		672
Deferred compensation		3,642		3,300
Other intangibles		—		5
PCI loans		10,572		23,667
FDIC loss sharing asset		210		—
California franchise tax		2,613		3,461
Other, net		3,897		6,140

Gross deferred tax asset		44,797		61,050

Deferred tax liabilities:
Depreciation		—		4,019
Intangibles — acquisitions		868		1,858
FDIC loss sharing asset		—		13,831
FHLB Stock		2,747		3,913
Deferred income		2,745		2,430
Unrealized gain on investment securities, net		9,638		16,695

Gross deferred tax liability		15,998		42,746

Net deferred tax asset — federal	$	28,799	$	18,304

State
Deferred tax assets:
Bad debt and credit loss deduction	$	7,172	$	6,014
Depreciation		440		—
Net operating loss carryforward		—		34
Deferred compensation		1,127		1,030
Other intangibles		—		668
PCI loans		3,242		—
FDIC loss sharing asset		97		6,498
Other, net		1,206		1,911

Gross deferred tax asset		13,284		16,155

Deferred tax liabilities:
Depreciation		—		589
Intangibles — acquisitions		269		—
PCI loans		—		4,389
FHLB Stock		851		797
Deferred income		762		374
Unrealized gain on investment securities, net		3,352		5,808

Gross deferred tax liability		5,234		11,957

Net deferred tax asset — state	$	8,050	$	4,198

A reconciliation of the statutory income tax rate to the consolidated effective income tax rate follows.


	For the Year Ended December 31,
	2015						2014						2013
	Amount			Percent			Amount			Percent			Amount			Percent
	(Dollars in thousands)
Federal income tax at statutory rate	$	52,978			35.0	%	$	56,979			35.0	%	$	50,496			35.0	%
State franchise taxes, net of federal benefit		10,457			6.9	%		11,233			6.9	%		8,734			6.1	%
Tax-exempt income		(7,619	)		(5.0	%)		(8,622	)		(5.3	%)		(10,189	)		(7.1	%)
Tax credits		(1,014	)		(0.7	%)		(1,014	)		(0.6	%)		(940	)		(0.7	%)
Other, net		(2,581	)		(1.7	%)		200			0.1	%		566			0.4	%

Provision for income taxes	$	52,221			34.5	%	$	58,776			36.1	%	$	48,667			33.7	%

The change in unrecognized tax benefits in 2015 and 2014 follows.


	For the Year Ended December 31,
	2015			2014
	(Dollars in thousands)
Balance, beginning of period	$	3,016		$	3,016
Additions for tax positions related to prior years		—			—
Reductions due to lapse of statue of limitations		(156	)		—
Settlement with tax authorities		(1,185	)		—

Balance, end of period	$	1,675		$	3,016

The total amount of unrecognized tax benefits at December 31, 2015 of $1.7 million would, if recognized, affect the effective tax rate. The amount accrued for payment of interest as of December 31, 2015 was $196,000. The Company records interest and penalties related to uncertain tax positions as part of other operating expense. We do not expect the total amount of unrecognized tax benefits to significantly increase or decrease within the next twelve months.

The Company is subject to federal income tax and franchise tax of the state of California. Our federal income tax returns for the years ended December 31, 2009 through 2015 are open to audit by the federal authorities and our California state tax returns for the years ended December 31, 2006 through 2015 are open to audit by state authorities.