Note 16.

Income Taxes

Income tax expense is comprised of current and deferred, federal and state income taxes on the Company’s pre-tax earnings. The following table presents the components of income tax expense in the periods indicated:


	Year Ended December 31,
(Amounts in thousands)	2013			2012			2011
Current tax expense:
Federal	$	12,819		$	13,733		$	7,101
State		1,743			1,291			110

Total current tax expense		14,562			15,024			7,211
Deferred tax (benefit) expense:
Federal		(3,136	)		(1,501	)		1,650
State		(518	)		605			712

Total deferred tax (benefit) expense		(3,654	)		(896	)		2,362

Total income tax expense	$	10,908		$	14,128		$	9,573

Deferred taxes derived from continuing operations reflect the net effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for tax purposes. The following table presents the significant components of the net deferred tax asset as of the dates indicated:


	December 31,
	2013		2012
(Amounts in thousands)
Deferred tax assets:
Allowance for loan losses	$	9,209	$	9,857
Unrealized losses on available-for-sale securities		8,184		169
Unrealized asset losses		8,018		8,023
Purchase accounting		6,796		6,191
FDIC assisted transactions		6,753		6,753
Intangible assets		6,384		7,582
Deferred compensation assets		4,224		4,235
Alternative minimum tax credit		1,849		1,849
Other deferred tax assets		2,670		2,763

Total deferred tax assets		54,087		47,422

Deferred tax liabilities:
FDIC indemnification asset		12,155		18,388
Fixed assets		2,199		2,158
Odd days interest deferral		1,958		2,028
Other		1,066		1,054

Total deferred tax liabilities		17,378		23,628

Net deferred tax asset	$	36,709	$	23,794

The Company’s effective tax rate, defined as income tax expense divided by pre-tax income, may vary significantly from the statutory rate due to permanent differences and the use of available tax credits. The Company’s most significant permanent differences, income and expense items excluded by law in the calculation of taxable income, include income on municipal securities, which are exempt from federal income tax, income on bank-owned life insurance, and tax credits generated by investments in low income housing and rehabilitation of historic structures. The following table reconciles the federal statutory tax rate to the Company’s effective tax rate from continuing operations in the periods indicated:


	Year Ended December 31,
	2013			2012			2011
(Amounts in thousands)
Federal statutory tax rate		35.00	%		35.00	%		35.00	%
(Reduction) increase resulting from:
Tax-exempt interest		(5.14	)		(4.16	)		(6.40	)
State income taxes, net of federal benefit		2.35			2.35			2.78
Other, net		(0.33	)		(0.11	)		0.96

Effective tax rate		31.88	%		33.08	%		32.34	%