Entity information:
1
1
.     Income Taxes
 
 
    For the years ended
December 31, 2017,
2016,
and
2015,
the current and deferred amounts of the income tax expense are summarized as follows:
 
   
Year Ended December 31
,
  
   
201
7
    
201
6
    
201
5
  
   
(In thousands
)
  
Current
:
                        
Federal
   $
59,433
     $
28,788
     $
31,587
  
State
    
28,278
      
22,364
      
26,396
  
Total Current
   $
87,711
     $
51,152
     $
57,983
  
                         
Deferred
:
                        
Federal
   $
31,818
      
11,775
     $
3,738
  
State
    
2,736
      
4,174
      
(1,734
 )
Total Deferred
   $
34,554
     $
15,949
     $
2,004
  
Total income tax expense
   $
122,265
     $
67,101
     $
59,987
  
 
Temporary differences between the amounts reported in the financial statements and the tax basis of assets and liabilities give rise to deferred taxes. Net deferred tax
assets at
December 31, 2017,
and at
December 31, 2016
, are included in other assets in the accompanying Consolidated Balance Sheets and are as follows:
 
   
As of December 31
,
  
   
201
7
    
201
6
  
   
(In thousands
)
  
Deferred Tax Asset
s
  
 
 
 
  
 
 
 
Loan loss allowance, due to differences in computation of bad debts
   $
37,157
     $
51,192
  
Share-based compensation
    
2,630
      
4,729
  
Accrual for bonuses
    
630
      
6,095
  
Non-accrual interest
    
2,100
      
4,246
  
Write-down on equity securities and venture capital investments
    
2,561
      
4,437
  
Depreciation and amortization
    
1,564
      
8,334
  
State tax
    
6,783
      
6,426
  
Unrealized loss on interest rate swaps
    
1,158
      
1,763
  
Unrealized loss on securities available-for-sale, net
    
-
      
1,121
  
Investment in affordable housing partnerships    
580
      
-
  
Basis difference in acquired assets    
1,676
      
-
  
Tax credits carried forward
    
9,278
      
-
  
Net operating loss carried forward
    
18,375
      
-
  
Other, net
    
3,279
      
3,598
  
Gross deferred tax assets
    
87,771
      
91,941
  
                 
Deferred Tax Liabilities
  
 
 
 
  
 
 
 
Deferred loan costs
    
(7,655
 )    
(8,695
 )
Investment in affordable housing partnerships
    
-
      
(2,659
 )
Basis difference in acquired assets
    
-
      
(4,841
 )
Dividends on Federal Home Loan Bank common stock
    
(1,021
 )    
(1,322
 )
Other, net
    
(3,758
 )    
(3,228
 )
Gross deferred tax liabilities
    
(12,434
 )    
(20,745
 )
Net deferred tax assets
   $
75,337
     $
71,196
  
 
Amounts for the current year are based upon estimates and assumptions and could vary from amounts shown on the tax return
s as filed.
 
In assessing the realization of deferred tax assets, management considers whether it is more likely than
not
that some portion or all of the deferred tax assets will
not
be realized. The ultimate realization of deferred tax assets is depend
ent on the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than
not
the Company will realize all benefits related to these deductible temporary differences
.
 
T
he Company had income tax refunds receivables of
$7.2
 million at
December 31, 2017,
and
$14.6
million at
December 31, 2016
. These income tax receivables are included in other assets in the accompanying Consolidated Balance Sheets.
 
On D
ecember
22,
2017,
the Tax Cuts and Jobs Act, was enacted into law and as a result, during the
fourth
quarter of
2017,
the Company recorded
$23.4
million of additional income tax expense related to the revaluation of the Company’s deferred tax assets and a
$2.6
million pretax write-down of low income housing tax credit investments
.
 
The Company
’s tax returns are open for audits by the Internal Revenue Service back to
2014
and by the California Franchise Tax Board back to
2013.
It is reasonably possible that unrecognized tax benefits could change significantly over the next
twelve
months. The Company does
not
expect that any such changes would have a material impact on its annual effective tax rate.
 
 
     Income tax expense results in effective tax rates that differ from the statutory Federal income tax rate for the years indicated as follows:
 
   
Year Ended December 31
,
  
   
201
7
    
201
6
    
201
5
  
   
(Dollars in thousands
)
  
Tax provision at Federal statutory rate
   $
104,407
      
35.0
 %   $
84,770
      
35.0
 %   $
77,384
      
35.0
 %
State income taxes, net of Federal income tax benefit
    
20,616
      
6.9
      
17,250
      
7.1
      
14,656
      
6.6
  
Deferred taxes write-down due to Tax Cuts and Jobs Act
    
23,365
      
7.8
      
-
      
-
      
-
      
-
  
Excess deduction for stock option and RSUs
    
(3,146
 )    
(1.0
 )    
-
      
-
      
-
      
-
  
Non-taxable bargain purchase gain
    
(1,970
 )    
(0.7
 )    
-
      
-
      
-
      
-
  
Low income housing and other tax credits
    
(20,656
 )    
(6.9
 )    
(37,901
 )    
(15.6
 )    
(30,986
 )    
(14.0
 )
Non-deductible stock options expense
    
-
      
-
      
3,469
      
1.4
      
-
      
-
  
Other, net
    
(351
 )    
(0.1
 )    
(487
 )    
(0.2
 )    
(1,067
 )    
(0.5
 )
Total income tax expense
   $
122,265
      
41.0
 %   $
67,101
      
27.7
 %   $
59,987
      
27.1
 %