Note 12. Income Taxes

The Company and its subsidiaries file a consolidated federal income tax return. The Company files consolidated or separate state income tax returns as permitted by individual states in which it operates.

Income tax expense was $14.9 million, $14.8 million, and $9.1 million for the years ended December 31, 2016, 2015, and 2014, respectively, which differed from the amount computed by applying the federal income tax rate of 35% to total income before income taxes as a result of the following:


	Year Ended December 31,
In thousands	2016		2015			2014
Federal tax expense at statutory rate	$	13,632	$	13,349		$	8,379
Increase (reduction) in income taxes resulting from:
State tax, net of federal benefit		1,275		1,098			603
Non-deductible compensation		—		378			—
Other		10		(51	)		155

	$	14,917	$	14,774		$	9,137

Income tax expense attributable to total income before income taxes consists of the following for the periods indicated:


	Year Ended December 31,
In thousands	2016		2015			2014
Current:
Federal	$	11,431	$	13,037		$	11,827
State and local		1,584		1,859			1,859

		13,015		14,896			13,686

Deferred:
Federal		1,694		(104	)		(3,958	)
State and local		208		(18	)		(591	)

		1,902		(122	)		(4,549	)

Total	$	14,917	$	14,774		$	9,137

Net deferred tax assets and liabilities consist of the following as of the periods indicated:


	December 31,
In thousands	2016		2015
Deferred tax assets:
Allowance for credit losses	$	15,823	$	14,463
Share-based compensation		2,888		2,241
Unearned insurance premiums		2,612		2,152
Amortization of intangible assets		675		661
Accrued expenses		565		475
Deferred contract incentive		307		—
State net operating loss carryforward		32		17
Other		50		111

Gross deferred tax assets		22,952		20,120

Deferred tax liabilities:
Fair market value adjustment of finance receivables		17,448		13,469
Deferred loan costs		2,283		2,302
Tax over book depreciation		2,266		1,585
Prepaid expenses		724		616
Other		198		166

Gross deferred tax liabilities		22,919		18,138

Net deferred tax asset	$	33	$	1,982

The Company’s determination of the realization of deferred tax assets is based on its assessment of all available positive and negative evidence. At December 31, 2016, positive evidence supporting the realization of the deferred tax assets includes the generation of taxable income for the two prior tax years and the reversal of taxable temporary differences. At December 31, 2016, the Company has not identified significant negative evidence related to the realization of its deferred tax assets. At both December 31, 2016 and December 31, 2015, the Company was in a three-year cumulative pre-tax book income position. As noted below, the Company had certain state net operating loss carryforwards at December 31, 2016, and the Company expects to fully utilize these deferred tax assets within the state carryforward periods based on available evidence existing as of the balance sheet date.

The Company had state net operating loss carryforwards of approximately $1.2 million and $0.6 million as of December 31, 2016 and 2015, respectively. These carryforwards are available to offset future taxable income. If not used, the current carryforwards will expire between 2030 and 2035.

At December 31, 2016, the Company did not have any material uncertain tax positions.