Income Taxes (Notes)

12 Months Ended

Dec. 31, 2016

The components of federal and state income tax expense for the years ended December 31, 2016, 2015 and 2014 were as follows (in thousands):



	2016			2015			2014
Current
Federal	$	11,375		$	7,357		$	6,956
State	2,953			1,841			2,287
Total Current	14,328			9,198			9,243
Deferred
Federal	(1,940		)	(84		)	(17		)
State	(448		)	104			28
Total Deferred	(2,388		)	20			11
Total	$	11,940		$	9,218		$	9,254

Recorded income tax expense differs from the expected tax expense (computed by applying the applicable statutory U.S. federal tax rate of 35% to income before income taxes). During 2016, 2015 and 2014, the Company was in a graduated tax rate position. The principal reasons for the difference are as follows (in thousands):



	2016			2015			2014
Expected income taxes	$	11,823		$	9,006		$	8,650
Effects of:
Tax-exempt income from bank owned life insurance	(235		)	—			—
Other tax exempt income	(1,577		)	(1,103		)	(954		)
Nondeductible interest expense	21			11			10
State taxes, net of federal taxes	1,628			1,264			1,505
Other items	280			41			43
Effect of marginal tax rate	—			(1		)	—
Total	$	11,940		$	9,218		$	9,254

Tax expense recorded by the Company during 2016, 2015 and 2014 did not include any interest or penalties. Tax returns filed with the Internal Revenue Service and Illinois Department of Revenue are subject to review by law under a three-year statute of limitations. The Company is no longer subject to U.S. federal or state income tax examinations by tax authorities for years before 2013.

The tax effects of the temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2016 and 2015 are presented below (in thousands):



	2016		2015
Deferred tax assets:
Allowance for loan losses	$	6,599	$	5,735
Available-for-sale investment securities	3,680		—
Deferred compensation	1,030		1,046
Supplemental retirement	259		281
Core deposit premium and other intangible assets	691		400
Other-than-temporary impairment on securities	438		438
Stock Compensation Expense	194		197
Deferred Revenue	101		98
Purchase Accounting	1,791		—
Acquisition Costs	319		430
Other	966		155
Total gross deferred tax assets	16,068		8,780
Deferred tax liabilities:
Deferred loan costs	178		133
Intangibles amortization	4,467		3,791
Prepaid expenses	383		340
FHLB stock dividend	380		278
Depreciation	740		766
Purchase accounting	—		7
Accumulated accretion	72		72
Mortgage servicing rights	387		—
Available-for-sale investment securities	—		462
Total gross deferred tax liabilities	6,607		5,849
Net deferred tax assets	$	9,461	$	2,931

Net deferred tax assets are recorded in other assets on the consolidated balance sheets. No valuation allowance related to deferred tax assets was recorded at December 31, 2016 and 2015 as management believes it is more likely than not that the deferred tax assets will be fully realized.