Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the amounts reported in the financial statements of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Amounts for the current year are based upon estimates and assumptions as of the date of these financial statements and could vary significantly from amounts shown on the tax returns as filed.

 

The components of the net deferred tax asset are as follows:

 

		At December 31,
		2017				2016
		(In thousands)
Deferred tax asset
Allowance for credit losses		$	7,349			$	11,801
State franchise taxes			1,871				2,679
AMT carryforward			1,752				-
Securities available for sale			8,586				7,283
Deferred compensation			5,279				8,043
Real estate owned			553				756
Purchased assets and assumed liabilities			1,111				3,026
Post-retirement benefits			526				903
Employee benefit accruals			2,066				3,399
VISA Class B shares			96				137
Limited partnership investments			57				86
Impaired capital assets			3,056				18,465
Accrued liabilities			1,609				967
Premises and equipment			299				577
Other			520				724
Total deferred tax asset			34,730				58,846
Deferred tax liability
Net deferred loan fees			281				346
Intangible assets			1,247				2,955
Other			90				128
Total deferred tax liability			1,618				3,429
Net deferred tax asset		$	33,112			$	55,417

 

Based on Management’s judgment, a valuation allowance is needed to reduce the gross deferred tax asset because it is more likely than that the gross deferred tax asset will be realized through recoverable taxes or future taxable income. Net deferred tax assets are included with other assets in the consolidated balance sheets.

 

The provision for federal and state income taxes consists of amounts currently payable and amounts deferred are as follows:

 

		For the Years Ended December 31,
		2017				2016				2015
		(In thousands)
Current income tax expense:
Federal		$	1,778			$	16,258			$	9,647
State			7,810				7,292				6,738
Total current			9,588				23,550				16,385
Deferred income tax (benefit) expense:
Federal			14,461				(2,604	)			1,643
State			783				158				(109	)
Total deferred			15,244				(2,446	)			1,534
Adjustment of net deferred tax asset for enacted changes in tax rates:
Federal			12,315				-				-
State			-				-				-
Total adjustments			12,315			$	-			$	-
Provision for income taxes		$	37,147			$	21,104			$	17,919

 

The provision for income taxes differs from the provision computed by applying the statutory federal income tax rate to income before taxes, as follows:

 

		For the Years Ended December 31,
		2017				2016				2015
		(In thousands)
Federal income taxes due at statutory rate		$	30,509			$	27,985			$	26,835
Reductions in income taxes resulting from:
Interest on state and municipal securities and loans not taxable for     federal income tax purposes			(7,794	)			(8,382	)			(9,046	)
State franchise taxes, net of federal income tax benefit			5,586				4,843				4,309
Re-measurement of net deferred tax asset due to enactment of new federal tax rate			12,315				-				-
Stock compensation deduction in excess of book expense			(583	)			-				-
Tax credits			(1,850	)			(2,286	)			(2,600	)
Dividend received deduction			(60	)			(52	)			(45	)
Cash value life insurance			(603	)			(607	)			(599	)
Other			(373	)			(397	)			(935	)
Provision for income taxes		$	37,147			$	21,104			$	17,919

 

The income tax provision includes a million dollar charge to re-measure the Company’s net deferred tax asset as a result of the enactment of the Tax Cuts and Jobs Act of At the Company had net operating loss and a thousand AMT tax credit carryforward that under the Tax Cuts and Jobs Act of are fully refundable by

 

A reconciliation of the beginning and ending amounts of unrecognized tax benefits follow:

 

		2017				2016
		(In thousands)
Balance at January 1,		$	1,099			$	1,243
Additions for tax positions taken in the current period			-				-
Reductions for tax positions taken in the current period			-				-
Additions for tax positions taken in prior years			-				-
Reductions for tax positions taken in prior years			-				(144	)
Decrease related to settlements with taxing authorities			(190	)			-
Decrease as a result of a lapse in statute of limitations			-				-
Balance at December 31,		$	909			$	1,099

 

The deductibility of these tax positions will be determined through examination by the appropriate tax jurisdictions or the expiration of the tax statute of limitations. The Company does anticipate any significant increase or decrease in unrecognized tax benefits during Unrecognized tax benefits at and include accrued interest and penalties of thousand and thousand, respectively. If recognized, the entire amount of the unrecognized tax benefits would affect the effective tax rate.

 

The Company classifies interest and penalties as a component of the provision for income taxes. At the tax years ended and remain subject to examination by the Internal Revenue Service and the tax years ended and   remain subject to examination by the California Franchise Tax Board.