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Note 10 - Income Taxes

12 Months Ended

Dec. 31, 2013

Note 10 - Income Taxes

Federal and state income tax expense consists of the following for the years ended December 31:

(dollars in thousands)	2013			2012			2011
Current federal income tax	$	26,136		$	20,937		$	12,760
Current state income tax		6,147			4,543			3,051
Total current		32,283			25,480			15,811

Deferred federal income tax benefit		(3,909	)		(4,564	)		(2,062	)
Deferred state income tax benefit		(56	)		(33	)		(18	)
Total deferred		(3,965	)		(4,597	)		(2,080	)

Total income tax expense	$	28,318		$	20,883		$	13,731

Temporary timing differences between the amounts reported in the financial statements and the tax bases of assets and liabilities result in deferred taxes. Gross deferred tax assets and liabilities, shown as the sum of the appropriate tax effect for each significant type of temporary difference, is presented below for the years ended December 31:

(dollars in thousands)	2013			2012			2011
Deferred tax assets
Allowance for credit losses	$	16,440		$	15,035		$	11,864
Deferred loan fees and costs		5,039			3,020			1,871
Stock-based compensation		1,370			829			453
Net operating loss		3,449			3,952			3,952
Unrealized loss on securities available for sale		2,213			-			-
Deferred rent		-			-			51
Premises and equipment		1,283			989			653
Other		4			4			4
Total deferred tax assets		29,798			23,829			18,848

Deferred tax liabilities
Unrealized gain on securities available for sale		-			(3,643	)		(3,250	)
Excess servicing		(95	)		(58	)		(72	)
Deferred rent		(264	)		(322	)		-
Intangible assets		(490	)		(678	)		(853	)
Total deferred tax liabilities		(849	)		(4,701	)		(4,175	)
Net deferred income tax account	$	28,949		$	19,128		$	14,673

A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate for the years ended December 31 follows:

	2013			2012			2011

Statutory federal income tax rate		35.00	%		35.00	%		35.00	%
Increase (decrease) due to
State income taxes, net of federal income tax benefit		5.26			5.22			5.15
Tax exempt interest and dividend income		(2.17	)		(2.46	)		(3.03	)
Stock-based compensation expense		0.06			0.08			0.18
Other		(0.56	)		(0.66	)		(1.44	)
Effective tax rates		37.59	%		37.18	%		35.86	%

The net operating loss carry forward acquired in conjunction with the Fidelity acquisition is subject to annual limits under Section 382 of the Internal Revenue Code of $718 thousand and expires in 2027. The Company remains subject to examination for the years ending after December 31, 2009.

- 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.

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