Note 17. Income Taxes
The components of income tax expense are as follows:
|
|
|
December 31, |
|
|||||||||
|
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
|
|
|
($ in thousands) |
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|||||||||
|
Current tax expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
25,300 |
|
|
$ |
8,613 |
|
|
$ |
3,245 |
|
|
State |
|
|
4,475 |
|
|
|
4,006 |
|
|
|
1,667 |
|
|
Total current |
|
|
29,775 |
|
|
|
12,619 |
|
|
|
4,912 |
|
|
Deferred tax expense (benefit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
(9,883 |
) |
|
|
426 |
|
|
|
2,440 |
|
|
State |
|
|
535 |
|
|
|
(1,094 |
) |
|
|
133 |
|
|
Total deferred |
|
|
(9,348 |
) |
|
|
(668 |
) |
|
|
2,573 |
|
|
Income tax expense |
|
$ |
20,427 |
|
|
$ |
11,951 |
|
|
$ |
7,485 |
|
The Company’s effective tax rate for 2016 and 2015 reflects the impact of tax filing in additional states and changes in the tax rate on cumulative temporary differences.
The effective tax rate differed from the statutory federal corporate rate of 35% as follows:
|
|
|
December 31, |
|
|||||||||
|
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
|||
|
|
|
($ in thousands) |
|
|||||||||
|
Federal statutory rate |
|
$ |
17,028 |
|
|
$ |
10,094 |
|
|
$ |
6,328 |
|
|
State income taxes, net of federal tax benefit |
|
|
3,256 |
|
|
|
1,893 |
|
|
|
1,170 |
|
|
Other |
|
|
143 |
|
|
|
(36 |
) |
|
|
(13 |
) |
|
|
|
$ |
20,427 |
|
|
$ |
11,951 |
|
|
$ |
7,485 |
|
Deferred income taxes are recorded when revenues and expenses are recognized in different periods for financial statement and income tax purposes. As of December 31, 2016 and 2015, components of deferred tax assets and liabilities are as follows:
|
|
|
December 31, |
|
|||||
|
|
|
2016 |
|
|
2015 |
|
||
|
|
|
($ in thousands) |
|
|||||
|
Deferred tax asset: |
|
|
|
|
|
|
|
|
|
Allowance for credit losses |
|
$ |
23,353 |
|
|
$ |
29,105 |
|
|
Capitalized startup costs |
|
|
— |
|
|
|
103 |
|
|
Other |
|
|
4,243 |
|
|
|
1,483 |
|
|
Securities fair value adjustments |
|
|
2,491 |
|
|
|
4,166 |
|
|
Equity compensation |
|
|
2,505 |
|
|
|
6,950 |
|
|
Accrued bonus and severance |
|
|
6,886 |
|
|
|
6,728 |
|
|
Income from non-performing assets |
|
|
4,329 |
|
|
|
4,325 |
|
|
Equity positions |
|
|
1,272 |
|
|
|
— |
|
|
Other real estate owned |
|
|
73 |
|
|
|
— |
|
|
Intangible Assets |
|
|
293 |
|
|
|
196 |
|
|
Gross deferred tax asset |
|
|
45,445 |
|
|
|
53,056 |
|
|
Deferred tax liability: |
|
|
|
|
|
|
|
|
|
Prepaid expenses |
|
|
1,091 |
|
|
|
1,226 |
|
|
Mark-to-market loans |
|
|
294 |
|
|
|
420 |
|
|
Deferred loan costs |
|
|
1,488 |
|
|
|
1,971 |
|
|
Cancellation of term debt income |
|
|
1,185 |
|
|
|
1,778 |
|
|
Equity positions |
|
|
— |
|
|
|
2,498 |
|
|
Equipment leasing |
|
|
— |
|
|
|
11,113 |
|
|
Goodwill |
|
|
580 |
|
|
|
917 |
|
|
Gross deferred tax liability |
|
|
4,638 |
|
|
|
19,923 |
|
|
Net deferred tax asset |
|
$ |
40,807 |
|
|
$ |
33,133 |
|
As of December 31, 2016 and 2015, we had net deferred tax assets of $40.8 million and $33.1 million, respectively. In assessing the realizability 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 Company’s management considered all available evidence, both positive and negative, in determining the realizability of deferred tax assets at December 31, 2016. Management considered carryback availability, the scheduled reversals of deferred tax liabilities, projected future taxable income during the reversal periods, and tax planning strategies in making this assessment. Management also considered our recent history of taxable income, trends in our earnings, positive financial ratios, and the impact of the downturn in the current economic environment (including the impact of credit on allowance and provision for loan losses) on the Company. Based upon its assessment, management believes that a valuation allowance was not necessary as of December 31, 2016.
As of December 31, 2016 and 2015, the Company did not have any material accrued interest, penalties or uncertain tax positions.
The Company files U.S. federal and various state income tax returns. As of December 31, 2016, the Company is subject to examination by the Internal Revenue Service and most state tax authorities for tax years after December 31, 2012. A few states remain subject to examination for the year ended December 31, 2011. During 2016, the Company received an examination notification from the Internal Revenue Service for the 2014 tax year. There have been no significant issues identified and the examination is still in process at December 31, 2016.