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The components of the Bank's net deferred income tax asset at December 31, 2011 and 2010 were as
<br />follows:
<br />(dollars in thousands) 2011 2010
<br />Assets
<br />Allowance for loan and lease losses and nonperforming assets $578,539 $619,997
<br />Investment securities 34,328
<br />Deferred compensation expenses 140,938 112,507
<br />Depreciation expense 8,082 8,357
<br />State income and franchise taxes 22,723 10,398
<br />Other 42,847 27,964
<br />Total deferred income tax assets $793,129 $813,551
<br />Liabilities
<br />Leases $201,926 $226,016
<br />Investment securities 81,645
<br />Intangible assets 17,555 19,587
<br />Total deferred income tax liabilities 301,126 245,603
<br />Net deferred income tax assets $492,003 $567,948
<br />Net deferred income tax assets are included within other assets in the consolidated balance sheets.
<br />Deferred taxes related to net unrealized gains (losses) on securities available for sale, net unrealized
<br />gains (losses) on derivatives, and employee benefit plan adjustments are recorded in cumulative OCI (see
<br />Note 18). These associated adjustments decreased OCI by $100.2 million.
<br />A valuation allowance for certain state capital loss carryforwards has been established in the amount
<br />of $3.5 million as of December 31, 2010. Management believes it is unlikely that sufficient capital gains
<br />will be generated during the carryforward period to fully utilize the capital losses. There is no change to the
<br />valuation allowance in 2011.
<br />With respect to all other deferred tax assets, no valuation allowances are required. Realization is
<br />dependent on generating sufficient taxable income in the future and, although realization is not assured,
<br />management believes it is more likely than not that all of the deferred tax assets will be realized. The
<br />amount of the deferred tax assets considered realizable, however, could be reduced in the near term if
<br />estimates of future taxable income are reduced.
<br />The following analysis reconciles the federal statutory income tax rate to the effective income tax rate
<br />for the years indicated:
<br />(dollars in thousands)
<br />2011 2010
<br />Amount % Amount
<br />Federal statutory income tax expense and rate $243,265 35.0% $ 96,229 35.0%
<br />Foreign, state and local taxes expense, net of federal effect 38,317 5.5 26,021 9.5
<br />Bank -owned life insurance (9,351) (1.4) (8,571) (3.1)
<br />Non-taxable income, net (13,246) (1.9) (21,188) (7.7)
<br />Tax credits (7,427) (1.1) (5,599) (2.1)
<br />Other 378 0.1 2,708 1.0
<br />Effective income tax expense and rate $251,936 36.2% $ 89,600 32.6%
<br />The Bank and its subsidiaries file income tax returns with the federal government and various state
<br />and local jurisdictions. The Internal Revenue Service ("IRS") is in the process of examining the Bank's
<br />income tax returns for 2006 and 2007. During 2011, the IRS issued an agreed Revenue Agent's Report for
<br />tax years 2003-2005 and the IRS proposed no significant adjustments with respect to the Bank or its
<br />acquired entities. With few exceptions, the Bank and its acquired entities are no longer subject to federal,
<br />state, and local income tax examinations for years prior to 2003. As of December 31, 2011, the state tax
<br />jurisdictions have not proposed any significant adjustments. The Bank believes that there are no other
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<br />2011 Bank of the West Annual Report
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