INCOME TAXES (Tables)
 12 Months Ended
Dec. 31, 2016
INCOME TAXES  
Schedule of allocation of federal income tax between current and deferred portion

 

 

 

 

 

 

 

 

 

 

Years Ended December 31, (in thousands)

    

2016

    

2015

    

2014

 

 

 

 

 

 

 

 

 

 

Current expense:

 

 

 

 

 

 

 

 

 

Federal

 

$
24,295

 

$
18,108

 

$
22,143

State

 

 
465

 

 
1,125

 

 
2,469

 

 

 

 

 

 

 

 

 

 

Deferred expense:

 

 

 

 

 

 

 

 

 

Federal

 

 
(1,753)

 

 
(1,262)

 

 
(8,637)

State

 

 
53

 

 
107

 

 
(447)

Total

 

$
23,060

 

$
18,078

 

$
15,528

 

Schedule of effective tax rate that differs from that computed at the federal statutory rate

 

 

 

 

 

 

 

 

Years Ended December 31, 

    

2016

    

2015

    

2014

    

 

 

 

 

 

 

 

 

Federal statutory rate times financial statement income

 
35.00

%  
35.00

%  
35.00

%  

Effect of:

 

 

 

 

 

 

 

State taxes, net of federal benefit

 
0.49

 
1.50

 
2.96

 

General business tax credits

 
(0.33)

 
(0.43)

 
(0.67)

 

Nontaxable income

 
(2.12)

 
(2.68)

 
(2.80)

 

Other, net

 
0.39

 
0.56

 
0.55

 

Effective tax rate

 
33.43

 
33.95

 
35.04

 

 

 

 

 

 

 

 

 

 

Schedule of deferred tax assets and liabilities

 

 

 

 

 

 

 

 

December 31, (in thousands)

    

2016

    

2015

 

 

 

 

 

 

 

 

 

Deferred tax assets:

 

 

 

 

 

 

 

Allowance for loan and lease losses

 

$
10,824

 

$
9,595

 

Accrued expenses

 

 
5,733

 

 
3,913

 

Net operating loss carryforward*

 

 
5,417

 

 
1,574

 

Depreciation

 

 

 —

 

 
1,289

 

Other-than-temporary impairment

 

 
746

 

 
750

 

Partnership losses

 

 
879

 

 
842

 

OREO writedowns

 

 
19

 

 
20

 

Fair value of cash flow hedges

 

 
138

 

 
210

 

Acquisition fair value adjustments

 

 
1,379

 

 

 —

 

Other  

 

 
2,237

 

 
2,061

 

Total deferred tax assets

 

 
27,372

 

 
20,254

 

 

 

 

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

 

 

 

Unrealized investment securities gains

 

 
(711)

 

 
(1,314)

 

Federal Home Loan Bank dividends

 

 
(4,296)

 

 
(4,315)

 

Deferred loan fees

 

 
(162)

 

 
(317)

 

Mortgage servicing rights

 

 
(1,870)

 

 
(1,781)

 

Bargain purchase gain

 

 
(1,436)

 

 
(552)

 

New market tax credits

 

 
(831)

 

 
(707)

 

Depreciation and amortization

 

 
(138)

 

 

 —

 

Other

 

 
(1,127)

 

 
(374)

 

Total deferred tax liabilities

 

 
(10,571)

 

 
(9,360)

 

 

 

 

 

 

 

 

 

Less: Valuation allowance

 

 
(1,635)

 

 
(1,564)

 

Net deferred tax asset

 

$
15,166

 

$
9,330

 

 

 

*The Company has federal and state net operating loss carryforwards (acquired in the Cornerstone acquisition) of $10.2 million (federal) and $7.2 million (state).  These carryforwards begin to expire in 2030 for both federal and state purposes.  The use of these federal and state carryforwards are each limited under IRC Section 382 to $722,000 annually for federal and $709,000 annually for state.  The Company also has a Kentucky net operating loss of $26.6 million, which began to expire in 2013. The Company maintains a valuation allowance, as it does not anticipate generating taxable income in Kentucky to utilize these carryforwards prior to expiration.  Finally, the Company has AMT credit carryforwards (acquired in the Cornerstone acquisition) of $84,000 with no expiration date.

Schedule of reconciliation of the beginning and ending amount of unrecognized tax benefits

 

 

 

 

 

 

 

 

 

 

 

Years Ended December 31, (in thousands)

    

2016

    

2015

    

2014

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$
1,800

 

$
1,977

 

$
1,381

 

Additions based on tax related to the current period

 

 
268

 

 
109

 

 
81

 

Additions for tax positions of prior periods

 

 

 —

 

 
15

 

 
750

 

Reductions for tax positions of prior periods

 

 
(90)

 

 

—

 

 

—

 

Reductions due to the statute of limitations

 

 
(340)

 

 
(301)

 

 
(235)

 

Settlements

 

 
(143)

 

 

—

 

 

—

 

Balance, end of period

 

$
1,495

 

$
1,800

 

$
1,977

 

 

Schedule of amount of interest and penalties

 

 

 

 

 

 

 

 

 

 

 

Years Ended December 31, (in thousands)

    

2016

    

2015

    

2014

 

 

 

 

 

 

 

 

 

 

 

 

Interest and penalties recorded in the income statement as a component of income tax expense

 

$
(290)

 

$
19

 

$
260

 

Interest and penalties accrued on balance sheet

 

 
557

 

 
847

 

 
827