|
10. |
INCOME TAXES |
The provision for income taxes follows (dollars in thousands):
|
|
|
Year Ended December 31, |
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|
|
|
2017 |
|
|
2016 |
|
|
2015 |
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|
Federal: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
$ |
8,456 |
|
|
$ |
11,517 |
|
|
$ |
5,451 |
|
|
Effect of tax cut |
|
|
2,710 |
|
|
|
— |
|
|
|
— |
|
|
Deferred |
|
|
(828 |
) |
|
|
(5,325 |
) |
|
|
1,028 |
|
|
|
|
|
10,338 |
|
|
|
6,192 |
|
|
|
6,479 |
|
|
State: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
3,604 |
|
|
|
3,396 |
|
|
|
1,928 |
|
|
Deferred |
|
|
(302 |
) |
|
|
(788 |
) |
|
|
664 |
|
|
|
|
|
3,302 |
|
|
|
2,608 |
|
|
|
2,592 |
|
|
|
|
$ |
13,640 |
|
|
$ |
8,800 |
|
|
$ |
9,071 |
|
The components of the net deferred tax asset, included in other assets, are as follows (dollars in thousands):
|
|
|
December 31, |
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|||||
|
|
|
2017 |
|
|
2016 |
|
||
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
Allowance for loan losses |
|
$ |
2,777 |
|
|
$ |
4,226 |
|
|
Foreclosed assets |
|
|
868 |
|
|
|
1,103 |
|
|
Deferred compensation |
|
|
3,498 |
|
|
|
4,522 |
|
|
Accrued reserves |
|
|
416 |
|
|
|
546 |
|
|
Non accrual loans |
|
|
190 |
|
|
|
306 |
|
|
Other than temporary impairment charge |
|
|
— |
|
|
|
432 |
|
|
Net operating loss carryforward |
|
|
2,354 |
|
|
|
3,634 |
|
|
Net unrealized loss on securities available-for-sale |
|
|
978 |
|
|
|
1,277 |
|
|
Other |
|
|
3,850 |
|
|
|
3,305 |
|
|
Total deferred tax assets |
|
|
14,931 |
|
|
|
19,351 |
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
Premises and equipment |
|
|
(1,301 |
) |
|
|
(1,425 |
) |
|
Deferred loan costs |
|
|
(2,344 |
) |
|
|
(3,099 |
) |
|
Other |
|
|
(4,759 |
) |
|
|
(5,315 |
) |
|
Total deferred tax liabilities |
|
|
(8,404 |
) |
|
|
(9,839 |
) |
|
Net deferred tax assets |
|
$ |
6,527 |
|
|
$ |
9,512 |
|
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”). Amont other changes, the Tax Act reduces the U.S. federal corporate tax rate from 35% to 21%. The Company has recorded an income tax expense of $2.7 million related to the remeasurement of federal net deferred tax assets resulting from the permanent reduction in the U.S. statutory corporate tax rate to 21% from 35%. The Company is still completing its analysis of the impact of the Tax Act and will record any adjustments to the provisional amount as a component of income tax expense during the measurement period provided for in SAB 118.
The expense for income taxes differs from amounts computed by applying the statutory Federal income tax rates to income before income taxes. The significant items comprising these differences consisted of the following (dollars in thousands):
|
|
|
Year Ended December 31, |
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|||||||||
|
|
|
2017 |
|
|
2016 |
|
|
2015 |
|
|||
|
Income tax expense at Federal statutory rate |
|
$ |
11,613 |
|
|
$ |
9,228 |
|
|
$ |
9,498 |
|
|
Increase (decrease) resulting from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
State franchise tax expense, net of Federal tax effect |
|
|
2,363 |
|
|
|
1,705 |
|
|
|
1,671 |
|
|
Tax exempt municipal income |
|
|
(1,299 |
) |
|
|
(1,053 |
) |
|
|
(1,034 |
) |
|
Affordable housing tax credits |
|
|
(711 |
) |
|
|
(685 |
) |
|
|
(770 |
) |
|
Effect of the Tax Act |
|
|
2,710 |
|
|
|
— |
|
|
|
— |
|
|
Excess tax benefit of stock-based compensation |
|
|
(248 |
) |
|
|
— |
|
|
|
— |
|
|
Other |
|
|
(788 |
) |
|
|
(395 |
) |
|
|
(294 |
) |
|
|
|
|
13,640 |
|
|
|
8,800 |
|
|
|
9,071 |
|
|
Effective tax rate |
|
|
41.1 |
% |
|
|
33.4 |
% |
|
|
33.4 |
% |
The Company is subject to federal income tax and income tax of the state of California. Our federal income tax returns for the years ended December 31, 2014, 2015 and 2016 are open to audit by the federal authorities and our California state tax returns for the years ended December 31, 2013, 2014, 2015 and 2016 are open to audit by the state authorities.
The Company has net operating loss carry forwards of approximately $7,794,000 for federal income and approximately $8,376,000 for California franchise tax purposes. Net operating loss carry forwards, to the extent not used will begin to expire in 2030. Net operating loss carry forwards available from acquisitions are substantially limited by Section 382 of the Internal Revenue Code and benefits not expected to be realized due to the limitation have been excluded from the deferred tax asset and net operating loss carry forward amounts noted above.
There were no recorded interest or penalties related to uncertain tax positions as part of income tax for the years ended December 31, 2017, 2016, and 2015, respectively. We do not expect the total amount of unrecognized tax benefits to significantly increase or decrease within the next twelve months.