() Income Taxes

(benefit) expense recorded directly to stockholders’ equity were as follows:

he increase in effective tax rate from to was the result of the -time, non-cash charge resulting from the remeasurement of deferred taxes as a result of tax reform somewhat offset by higher utilization of tax credits during the year. The Tax Cuts and Jobs Act was enacted in requiring an immediate recalculation of Bancorp’s net deferred tax asset which resulted in million of additional income tax expense in the quarter of The effective tax rate in was also reduced by the adoption of ASU - “Compensation – Stock Compensation Improvements to Employee Share-Based Payment Accounting”. The new standard requires excess tax benefits and deficiencies related to share-based payment awards to be reflected in the statement of operations as a component of the provision for income taxes. For Bancorp recorded a benefit of million for such excess benefits against the provision for income tax expense. Prior to adoption of ASU - these tax benefits were recorded directly to additional paid-in capital. Tax benefits recorded to capital for and were million and thousand, respectively.

2015

2016

2016.

n the U.S. Securities and Exchange Commission (“SEC”) released Staff Accounting Bulletin (“SAB ) to address any uncertainty or diversity of views in practice in accounting for the income tax effects of tax reform in situations where a registrant does have the necessary information available, prepared or analyzed in reasonable detail to complete this accounting in the reporting period that includes the enactment date. SAB allows a measurement period to extend beyond year from the tax reform’s enactment date to complete the necessary accounting.

two

not

1

’s deferred tax assets of thousand for temporary differences in certain tax credit investments is awaiting receipt of Schedule K- from outside preparers. ) Bancorp estimated that reductions are required to deferred tax assets included in the thousand of future deductions for compensation that might be subject to new limitations under Code Sec. (m) which, generally, limits to million annual deductions for certain compensation paid to certain executives. There is uncertainty in applying new rules to existing contracts, and Bancorp is seeking clarification before finalizing its analysis. In a area, the Company recorded provisional amounts to its deferred tax liability for temporary differences between the tax and financial reporting bases of certain property and equipment items. These cannot be reasonably estimated. Bancorp’s deferred tax liability of thousand for temporary differences between the tax and financial reporting bases of fixed assets is awaiting completion of a cost segregation study to take advantage of additional depreciation deductions available through tax reform. Bancorp will complete and record income tax effects of tax reform during the period the necessary information becomes available. This measurement period will extend beyond

not

not

not

December 31,

201

of thousand and thousand to reflect management’s estimate of the temporary deductible differences that expire prior to their utilization has been recorded as of and respectively.

and the gross amount of unrecognized tax benefits, including penalties and interest, was thousand. If recognized, tax benefits would reduce tax expense and accordingly, increase net income. The amount of unrecognized tax benefits increase or decrease in the future for various reasons including adding amounts for current year tax positions, expiration of open income tax returns due to statutes of limitation, changes in management’s judgment about the level of uncertainty, status of examination, litigation and legislative activity and addition or elimination of uncertain tax positions. Federal and state income tax returns are subject to examination for the years after