Entity information:
14. INCOME TAXES
The provision for income taxes charged to operations consists of the following: 
 
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
 
 
(in thousands)
Current
 
$
37,854

 
$
93,737

 
$
61,040

Deferred
 
88,471

 
7,644

 
3,254

Total tax provision
 
$
126,325

 
$
101,381

 
$
64,294


The reconciliation between the statutory federal income tax rate and the Company’s effective tax rate are summarized as follows: 
 
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
 
 
(in thousands)
Income tax at statutory rate
 
$
158,136

 
$
126,413

 
$
90,489

Increase (decrease) resulting from:
 
 
 
 
 
 
State income taxes, net of federal benefits
 
9,765

 
8,046

 
5,783

Bank owned life insurance
 
(1,351
)
 
(1,317
)
 
(1,365
)
Tax-exempt income
 
(26,403
)
 
(22,425
)
 
(20,226
)
Change in federal rate applied to deferred items
 
(10,411
)
 
—

 
—

Excise tax
 
9,689

 
—

 
—

Deferred tax asset valuation allowance
 
—

 
—

 
(2,290
)
Low income housing tax credits
 
(7,361
)
 
(6,153
)
 
(5,223
)
Other, net
 
(5,739
)
 
(3,183
)
 
(2,874
)
Total tax provision
 
$
126,325

 
$
101,381

 
$
64,294


The effective tax rate for the year ended December 31, 2017 was 27.96%, compared to 28.07% for the year ended December 31, 2016, and 24.87% for the year ended December 31, 2015. There was not a significant change in the effective tax rate from 2017 compared to 2016. The increase in the effective tax rate from 2015 compared to 2016 is due primarily to the increase in pre-tax income without proportional increases to favorable tax rate items for the year ended December 31, 2016 compared to 2015.
The 2017 Tax Cuts and Jobs Act significantly changes how the United States taxes corporations. This new legislation lowered the statutory corporate tax rate from 35% to 21%, but it also limited or eliminated certain deductions. The Company has analyzed and interpreted the current and future impacts of the Act and recorded the effects in its financial statements as of December 31, 2017. However, the legislation remains subject to potential amendments, technical corrections and further guidance at both the federal and state levels. Further, in connection with the filing of its tax return, the Company has the ability to change some of the elections it has applied in the calculation of the year-end tax provision, such as NOL carryback/carryovers and depreciation. If a material adjustment is needed for any of these items, it will be included in the provision for income taxes in the period in which the change occurs.

The cumulative tax effects of the primary temporary differences are shown in the following table:
 
 
December 31,
 
 
2017
 
2016
 
 
(in thousands)
Deferred tax assets:
 
 
Allowance for credit losses
 
$
37,851

 
$
50,860

Fair market value adjustment related to acquired loans
 
—

 
7,941

Stock-based compensation
 
8,335

 
12,302

Net operating loss carryovers
 
34,710

 
9,024

Tax credit carryovers
 
24,171

 
—

Startup costs and other amortization
 
2,495

 
4,216

Allowance for other assets acquired through foreclosure, net
 
1,459

 
3,230

Section 382 limited NUBILs
 
—

 
3,251

Premises and equipment
 
1,428

 
—

Unrealized loss on AFS securities
 
4,117

 
9,149

Other
 
10,239

 
13,679

Total gross deferred tax assets
 
124,805

 
113,652

Deferred tax liabilities:
 
 
 
 
Deferred income
 
(68,799
)
 
—

Unrealized gain on debt instruments measured at fair value
 
(2,661
)
 
(6,132
)
Deferred loan costs
 
(6,594
)
 
(3,212
)
Insurance premiums
 
(35,789
)
 
—

Core deposit intangible
 
(2,809
)
 
(4,949
)
Premises and equipment
 
—

 
(449
)
Unrealized gains on financial instruments measured at fair value
 
(1,396
)
 
(2,200
)
Other
 
(977
)
 
(1,516
)
Total deferred tax liabilities
 
(119,025
)
 
(18,458
)
Deferred tax assets, net
 
$
5,780

 
$
95,194


Deferred tax assets and liabilities are included in the Consolidated Financial Statements at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be reversed. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.
For the year ended December 31, 2017, the net deferred tax assets decreased $89.4 million to $5.8 million. This overall decrease in the net deferred tax asset was primarily the result of deferring taxable income to future periods and accelerating deductions which were only partially offset by the creation of NOL and tax credit carryovers and the revaluation of deferred taxes under the 2017 Tax Cuts and Jobs Act.
Although realization is not assured, the Company believes that the realization of the recognized deferred tax asset of $5.8 million at December 31, 2017 is more-likely-than-not based on expectations as to future taxable income and based on available tax planning strategies within the meaning of ASC 740, Income Taxes, that could be implemented if necessary to prevent a carryover from expiring.
At each of the periods ended December 31, 2017 and 2016, the Company had no deferred tax valuation allowance.
As of December 31, 2017, the Company’s gross federal NOL carryovers, a portion of which are subject to limitations under Section 382 of the IRC, totaled approximately $169.5 million for which a deferred tax asset of $31.1 million has been recorded reflecting the expected benefit of these federal NOL carryovers. The Company also has varying gross amounts of state NOL carryovers with California and Arizona being the most significant. The ending gross California and Arizona NOL carryovers totaled approximately $25.0 million and $17.3 million, respectively. A deferred tax asset of $3.6 million has been recorded to reflect the expected benefit of all state NOL carryovers. If not utilized, a portion of the federal and state NOL carryovers will begin to expire in 2028 and 2023, respectively. As of December 31, 2017, the Company’s federal and state tax credit carryovers totaled $23.1 million and $1.1 million, respectively. If not utilized, a portion of the federal and state tax credit carryovers will begin to expire in 2038 and 2023, respectively. In management’s opinion, it is more-likely-than-not that the results of future operations will generate sufficient taxable income to realize all of the deferred tax benefits related to these NOL and tax credit carryovers.
The Company files income tax returns in the U.S. federal jurisdiction and in various states. With few exceptions, the Company is no longer subject to U.S. federal, state, or local income tax examinations by tax authorities for years before 2013.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the Consolidated Financial Statements in the period in which, based on all available evidence, management believes it is more-likely-than-not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above would be reflected as a liability for unrecognized tax benefits in the accompanying Consolidated Balance Sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.
The total gross activity of unrecognized tax benefits related to uncertain tax positions are shown in the following table:
 
December 31,
 
2017
 
2016
 
(in thousands)
Beginning balance
$
1,038

 
$
1,038

Gross Increases
 
 
 
Tax positions in prior periods
—

 
—

Current period tax positions
—

 
—

Gross decreases
 
 
 
Tax positions in prior periods
—

 
—

Settlements
—

 
—

Lapse of statute of limitations
—

 
—

Ending balance
$
1,038

 
$
1,038


As of December 31, 2017 and 2016, the total amount of unrecognized tax benefits, net of associated deferred tax benefit, that would impact the effective tax rate, if recognized, is $0.7 million. The Company anticipates that approximately $0.4 million of the unrecognized tax benefits will be resolved within the next twelve months.
During the years ended December 31, 2017 and 2016, the Company recognized no amounts for interest and penalties. During the year ended December 31, 2015, the Company recognized $0.1 million in penalties and no amounts for interest.
As of December 31, 2017 and 2016, the Company has accrued a total liability of $0.1 million for penalties and $0.1 million for interest.
LIHTC
The Company invests in LIHTC funds that are designed to generate a return primarily through the realization of federal tax credits.
LIHTC and unfunded LIHTC obligations are included as part of other assets and other liabilities, respectively, in the Consolidated Balance Sheets and total $267.0 million and $151.3 million, respectively, as of December 31, 2017, compared to $187.4 million and $84.4 million as of December 31, 2016. For the years ended December 31, 2017, 2016, and 2015, $25.4 million, $17.3 million, and $14.4 million of amortization related to LIHTC investments was recognized as a component of income tax expense, respectively.