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INCOME TAXES:
 12 Months Ended
Dec. 31, 2011
INCOME TAXES:  
INCOME TAXES:

 

13.     INCOME TAXES:

 

Income tax expense is summarized as follows:

 

(Dollar amounts in thousands)

 

2011

 

2010

 

2009

 

Federal:

 

 

 

 

 

 

 

Currently payable

 

$

11,872

 

$

15,582

 

$

8,721

 

Deferred

 

311

 

(4,850

)

(1,574

)

 

 

12,183

 

10,732

 

7,147

 

State:

 

 

 

 

 

 

 

Currently payable

 

1,901

 

2,325

 

877

 

Deferred

 

313

 

(1,090

)

(469

)

 

 

2,214

 

1,235

 

408

 

TOTAL

 

$

14,397

 

$

11,967

 

$

7,555

 

 

The reconciliation of income tax expense with the amount computed by applying the statutory federal income tax rate of 35% to income before income taxes is summarized as follows:

 

(Dollar amounts in thousands) 

 

2011

 

2010

 

2009

 

Federal income taxes computed at the statutory rate

 

$

18,057

 

$

14,004

 

$

10,596

 

Add (deduct) tax effect of:

 

 

 

 

 

 

 

Tax exempt income

 

(3,875

)

(3,400

)

(3,521

)

ESOP dividend deduction

 

(1,085

)

—

 

—

 

State tax, net of federal benefit

 

1,439

 

803

 

265

 

Affordable housing credits

 

(86

)

—

 

—

 

Other, net

 

(53

)

560

 

215

 

TOTAL

 

$

14,397

 

$

11,967

 

$

7,555

 

 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2011 and 2010, are as follows:

 

(Dollar amounts in thousands)

 

2011

 

2010

 

Deferred tax assets:

 

 

 

 

 

Other than temporary impairment

 

$

6,068

 

$

5,995

 

Net unrealized losses on retirement plans

 

15,166

 

8,512

 

Loan losses provision

 

7,803

 

9,315

 

Deferred compensation

 

8,087

 

8,035

 

Compensated absences

 

759

 

723

 

Post-retirement benefits

 

2,016

 

1,971

 

Deferred loss on acquisition

 

187

 

—

 

Other

 

1,771

 

1,333

 

GROSS DEFERRED ASSETS

 

41,857

 

35,884

 

 

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

 

Net unrealized gains on securities available-for-sale

 

(8,493

)

(2,589

)

Depreciation

 

(1,830

)

(1,578

)

Federal Home Loan Bank stock dividends

 

—

 

(96

)

Mortgage servicing rights

 

(763

)

(827

)

Pensions

 

(3,587

)

(1,865

)

Deferred gain on acquisition

 

—

 

(666

)

Other

 

(1,055

)

(2,260

)

GROSS DEFERRED LIABILITIES

 

(15,728

)

(9,881

)

NET DEFERRED TAX ASSETS (LIABILITIES)

 

$

26,129

 

$

26,003

 

 

Unrecognized Tax Benefits — A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

 

(Dollar amounts in thousands) 

 

2011

 

2010

 

2009

 

Balance at January 1

 

$

901

 

$

660

 

$

549

 

Additions based on tax positions related to the current year

 

137

 

113

 

111

 

Additions based on tax positions related to prior years

 

—

 

181

 

 

 

Reductions due to the statute of limitations

 

(176

)

(53

)

—

 

Settlements

 

—

 

—

 

—

 

Balance at December 31

 

$

862

 

$

901

 

$

660

 

 

Of this total, $862 represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. The Corporation does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next 12 months.

 

The total amount of interest and penalties recorded in the income statement for the years ended December 31, 2011, 2010 and 2009 was an expense decrease of $18 and an increase of $43 and $9, respectively. The amount accrued for interest and penalties at December 31, 2011, 2010 and 2009 was $98, $116 and $73, respectively.

 

The Corporation and its subsidiaries are subject to U.S. federal income tax as well as income tax of the states of Indiana and Illinois. The Corporation is no longer subject to examination by taxing authorities for years before 2008.