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Note 12 - Income Taxes

12 Months Ended

Dec. 31, 2014

Note 12 – Income Taxes

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

(dollars in thousands)	2014			2013			2012
Current federal income tax	$	32,384		$	26,136		$	20,937
Current state income tax		7,114			6,147			4,543
Total current		39,498			32,283			25,480

Deferred federal income tax benefit		(7,494	)		(3,909	)		(4,564	)
Deferred state income tax benefit		(46	)		(56	)		(33	)
Total deferred		(7,540	)		(3,965	)		(4,597	)

Total income tax expense	$	31,958		$	28,318		$	20,883

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)	2014			2013			2012
Deferred tax assets
Allowance for credit losses	$	18,544		$	16,440		$	15,035
Deferred loan fees and costs		10,337			5,039			3,020
Stock-based compensation		1,714			1,370			829
Net operating loss		3,198			3,449			3,952
Unrealized loss on securities available for sale		-			2,213			-
SERP		1,421			-			-
Premises and equipment		1,590			1,283			989
Other		71			4			4
Total deferred tax assets		36,875			29,798			23,829

Deferred tax liabilities
Unrealized gain on securities available for sale		(1,765	)		-			(3,643	)
Excess servicing		(114	)		(95	)		(58	)
Deferred rent		(162	)		(264	)		(322	)
Intangible assets		(2,323	)		(490	)		(678	)
Total deferred tax liabilities		(4,364	)		(849	)		(4,701	)
Net deferred income tax amount	$	32,511		$	28,949		$	19,128

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

	2014			2013			2012

Statutory federal income tax rate		35.00	%		35.00	%		35.00	%
Increase (decrease) due to
State income taxes, net of federal income tax benefit		5.33			5.26			5.22
Tax exempt interest and dividend income		(2.28	)		(2.17	)		(2.46	)
Stock-based compensation expense		0.04			0.06			0.08
Other		(1.02	)		(0.56	)		(0.66	)
Effective tax rates		37.07	%		37.59	%		37.18	%

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, 2010.

- 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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