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Income Taxes | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Income tax expense (benefit) for the years ended December 31 is comprised of:
(dollars in thousands) | 2016 |  |  | 2015 |  |  | 2014 |
Federal |  |  |  |  |
Current | $ | 24,521 |  |  | $ | 24,825 |  |  | $ | 15,979 |
Deferred | 665 |  |  | (427 | ) |  | 1,536 |
Total Federal | 25,186 |  |  | 24,398 |  |  | 17,515 |
State |  |  |  |  |
Current | 248 |  |  | — |  |  | — |
Deferred | (129 | ) |  | — |  |  | — |
Total State | 119 |  |  | — |  |  | — |
Total Federal and State | $ | 25,305 |  |  | $ | 24,398 |  |  | $ | 17,515 |
The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before income taxes. We ordinarily generate an annual effective tax rate that is less than the federal statutory rate of 35 percent primarily due to benefits resulting from tax-exempt interest, excludable dividend income, tax-exempt income on BOLI and tax benefits associated with LIHTC from certain partnership investments. The statutory to effective tax rate reconciliation for the years ended December 31 is as follows:
| 2016 |  | 2015 |  | 2014 |
Statutory tax rate | 35.0 | % | 35.0 | % | 35.0 | %
Low income housing tax credits | (3.8 | )% | (4.4 | )% | (5.8 | )%
Tax-exempt interest | (4.4 | )% | (4.1 | )% | (4.6 | )%
Bank owned life insurance | (0.8 | )% | (0.8 | )% | (0.8 | )%
Other | 0.2 | % | 1.0 | % | (0.6 | )%
Effective Tax Rate | 26.2 | % | 26.7 | % | 23.2 | %
Significant components of our temporary differences were as follows at December 31:
(dollars in thousands) | 2016 |  |  | 2015 |
Deferred Tax Liabilities: |  |  |
Net unrealized holding gains on securities available-for-sale | $ | (2,557 | ) |  | $ | (3,563 | )
Prepaid pension | (2,770 | ) |  | (2,865 | )
Deferred loan income | (3,815 | ) |  | (2,847 | )
Depreciation on premises and equipment | (1,239 | ) |  | (1,226 | )
Other | (1,766 | ) |  | (809 | )
Total Deferred Tax liabilities | (12,147 | ) |  | (11,310 | )
Deferred Tax Assets: |  |  |
Allowance for loan losses | 19,446 |  |  | 17,740 |
Purchase accounting adjustments | 365 |  |  | 1,298 |
Other employee benefits | 3,983 |  |  | 2,556 |
Low income housing partnerships | 4,845 |  |  | 4,531 |
Net adjustment to funded status of pension | 10,018 |  |  | 12,425 |
Impairment of securities | 1,318 |  |  | 1,354 |
State net operating loss carryforwards | 3,114 |  |  | 2,670 |
Other | 4,984 |  |  | 6,155 |
Gross Deferred Tax Assets | 48,073 |  |  | 48,729 |
Less: Valuation allowance | (3,114 | ) |  | (2,670 | )
Total Deferred Tax Assets | 44,959 |  |  | 46,059 |
Net Deferred Tax Asset | $ | 32,812 |  |  | $ | 34,749 |
We establish a valuation allowance when it is more likely than not that we will not be able to realize the benefit of the deferred tax assets. Except for Pennsylvania net operating losses, or NOLs, we have determined that a valuation allowance is unnecessary for the deferred tax assets because it is more likely than not that these assets will be realized through future reversals of existing temporary differences and through future taxable income. The valuation allowance is reviewed quarterly and adjusted based on management’s assessments of realizable deferred tax assets. Gross deferred tax assets were reduced by a valuation allowance of $3.1 million in 2016 related to Pennsylvania income tax NOLs. The Pennsylvania NOL carryforwards total $31.2 million and will expire in the years 2020-2036. Unrecognized Tax Benefits The following table reconciles the change in Federal and State gross unrecognized tax benefits, or UTB, for the years ended December 31:
(dollars in thousands) | 2016 |  |  | 2015 |  |  | 2014 |
Balance at beginning of year | $ | 1,102 |  |  | $ | 284 |  |  | $ | 1,902 |
Prior period tax positions |  |  |  |  |
Increase | — |  |  | 818 |  |  | 55 |
Decrease | (449 | ) |  | — |  |  | (1,673 | )
Current period tax positions | 151 |  |  | — |  |  | — |
Reductions for statute of limitations expirations | — |  |  | — |  |  | — |
Balance at End of Year | $ | 804 |  |  | $ | 1,102 |  |  | $ | 284 |
Amount That Would Impact the Effective Tax Rate if Recognized | $ | 610 |  |  | $ | 542 |  |  | $ | 184 |
We classify interest and penalties as an element of tax expense. We monitor changes in tax statutes and regulations to determine if significant changes will occur over the next 12 months. As of December 31, 2016, no significant changes to UTB are projected, however, tax audit examinations are possible. The UTB balance for the years ended December 31, 2016, 2015 and 2014 include a cumulative amount of $0.1 million related to interest in the Consolidated Balance Sheets. We recognized insignificant amounts of interest in 2016, 2015 and 2014 in the Consolidated Statements of Net Income. During 2016, the IRS completed its examination of our 2013 tax year. The examination was closed with no material adjustments impacting tax expense. As of December 31, 2016, all income tax returns filed for the tax years 2014 and 2015 remain subject to examination by the IRS.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
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