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Note 10 - Income Taxes | 12 Months Ended
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Dec. 31, 2019
Notes to Financial Statements |
Income Tax Disclosure [Text Block] |
10. | Income Taxes
For the years ended December 31, 2019, 2018, and 2017, the current and deferred amounts of the income tax expense are summarized as follows:
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
|  | (In thousands) |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 20,943 |  |  | $ | 26,820 |  |  | $ | 59,433 |
State |  |  | 39,466 |  |  |  | 36,639 |  |  |  | 28,278 |
Total Current |  | $ | 60,409 |  |  | $ | 63,459 |  |  | $ | 87,711 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 7,464 |  |  | $ | 1,495 |  |  | $ | 31,818 |
State |  |  | 2,361 |  |  |  | 848 |  |  |  | 2,736 |
Total Deferred |  | $ | 9,825 |  |  | $ | 2,343 |  |  | $ | 34,554 |
Total income tax expense |  | $ | 70,234 |  |  | $ | 65,802 |  |  | $ | 122,265 |
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, 2019, and at December 31, 2018, are included in other assets in the accompanying Consolidated Balance Sheets and are as follows:
|  | As of December 31, |
|  | 2019 |  |  | 2018 |
|  | (In thousands) |
Deferred Tax Assets |  |  |  |  |  |  |  |
Loan loss allowance, due to differences in computation of bad debts |  | $ | 38,936 |  |  | $ | 37,567 |
Share-based compensation |  |  | 2,945 |  |  |  | 3,260 |
Non-accrual interest |  |  | 1,005 |  |  |  | 2,277 |
Write-down on equity securities and venture capital investments |  |  | 2,010 |  |  |  | 2,095 |
Depreciation and amortization |  |  | — |  |  |  | 3,798 |
State tax |  |  | 4,540 |  |  |  | 4,344 |
Unrealized loss on interest rate swaps |  |  | 1,599 |  |  |  | 190 |
Unrealized loss on securities available-for-sale, net |  |  | — |  |  |  | 3,864 |
Unrealized loss on equity securities |  |  | — |  |  |  | 843 |
Tax credits carried forward |  |  | 9,473 |  |  |  | 9,473 |
Net operating loss carried forward |  |  | 14,247 |  |  |  | 17,098 |
Other, net |  |  | 5,012 |  |  |  | 4,782 |
Gross deferred tax assets |  |  | 79,767 |  |  |  | 89,591 |
Deferred Tax Liabilities |  |  |  |  |  |  |  |
Deferred loan costs |  |  | (9,778 | ) |  |  | (8,839 | )
Depreciation and amortization |  |  | (1,606 | ) |  |  | — |
Unrealized gain on securities available-for-sale, net |  |  | (5,990 | ) |  |  | — |
Unrealized gain on equity securities |  |  | (668 | ) |  |  | — |
Dividends on Federal Home Loan Bank common stock |  |  | (978 | ) |  |  | (956 | )
Other, net |  |  | (3,307 | ) |  |  | (4,008 | )
Gross deferred tax liabilities |  |  | (22,327 | ) |  |  | (13,803 | )
Net deferred tax assets |  | $ | 57,440 |  |  | $ | 75,788 |
Amounts for the current year are based upon estimates and assumptions and could vary from amounts shown on the tax returns as filed. As of December 31, 2019, the Company’s gross net operating loss (“NOL”) carryovers, all of which are subject to limitation under Section 382 of the Internal Revenue Code, totaled approximately $43.0 million for which a deferred tax asset of $9.0 million has been recorded reflecting the expected benefit of these federal NOL carryovers. At December 31, 2019, the Company has California NOL carryovers of $52.8 million for which a California deferred tax asset of $5.2 million has been recorded reflecting the expected benefit of these California NOL carryovers. The annual IRC Section 382 limitation is $10.2 million per year until 2021 and decreases to $8.8 million in 2022 and to $7.3 million per year thereafter. If not utilized, a portion of the Company’s federal and state NOL’s will begin to expire in 2030. At December 31, 2019, the Company’s federal tax credit carryovers and AMT tax credit carryovers total $7.7 million and $1.1 million, respectively. If not utilized, the federal tax credit carryovers will begin in expire in 2028. The AMT tax credit carryovers can be carried forward indefinitely. 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 dependent 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. The Company had current income tax receivables of $9.6 million at December 31, 2019, and $9.0 million at December 31, 2018. Current income tax receivable is included in other assets in the accompanying Consolidated Balance Sheets. The Company’s tax returns are open for audits by the Internal Revenue Service back to 2016 and by the California Franchise Tax Board back to 2015. The Company is currently under audit by the Internal Revenue Service for 2017. 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, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
|  | (Dollars in thousands) |
Tax provision at Federal statutory rate |  | $ | 73,368 |  |  |  | 21.0 | % |  | $ | 70,914 |  |  |  | 21.0 | % |  | $ | 104,407 |  |  |  | 35.0 | %
State income taxes, net of Federal income tax benefit |  |  | 33,276 |  |  |  | 9.5 |  |  |  | 29,750 |  |  |  | 8.8 |  |  |  | 20,616 |  |  |  | 6.9 |
Deferred taxes write-down due to Tax Cuts and Jobs Act |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 23,365 |  |  |  | 7.8 |
Excess deduction for stock option and RSUs |  |  | (398 | ) |  |  | (0.1 | ) |  |  | (555 | ) |  |  | (0.2 | ) |  |  | (3,146 | ) |  |  | (1.0 | )
Non-taxable bargain purchase gain |  |  | — |  |  |  | — |  |  |  | (71 | ) |  |  | — |  |  |  | (1,970 | ) |  |  | (0.7 | )
Low income housing and other tax credits |  |  | (37,519 | ) |  |  | (10.7 | ) |  |  | (34,517 | ) |  |  | (10.2 | ) |  |  | (20,656 | ) |  |  | (6.9 | )
Other, net |  |  | 1,507 |  |  |  | 0.4 |  |  |  | 281 |  |  |  | 0.1 |  |  |  | (351 | ) |  |  | (0.1 | )
Total income tax expense |  | $ | 70,234 |  |  |  | 20.1 | % |  | $ | 65,802 |  |  |  | 19.5 | % |  | $ | 122,265 |  |  |  | 41.0 | %

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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