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Note 11 - Income Taxes
 12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

11.         Income Taxes

 

For the years ended December 31, 2024, 2023, and 2022, the current and deferred amounts of the income tax expense are summarized as follows: 

 

  

Year Ended December 31,

 
  

2024

  

2023

  

2022

 
  

(In thousands)

 

Current:

            

Federal

 $15,762  $5,428  $57,029 

State

  36,557   48,812   56,953 

Total Current

 $52,319  $54,240  $113,982 
             

Deferred:

            

Federal

 $(18,923) $(1,676) $(1,776)

State

  (1,833)  (3,106)  (312)

Total Deferred

 $(20,756) $(4,782) $(2,088)
             

Total income tax expense

 $31,563  $49,458  $111,894 

 

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 as of December 31, 2024, and 2023 are included in other assets in the accompanying Consolidated Balance Sheets and are as follows:

 

  

As of December 31,

 
  

2024

  

2023

 
  

(In thousands)

 

Deferred Tax Assets

        

Loan loss allowance

 $52,484  $50,126 

Accrual for bonuses

  5,770   4,636 

Non-accrual interest

  3,642   2,164 

Write-down on equity securities and venture capital investments

  1,958   2,018 

Depreciation and amortization

  —   765 

State tax

  2,910   5,693 

Unrealized loss on securities available-for-sale, net

  32,333   31,728 

Tax credits carried forward

  29,307   9,136 

Net operating loss carried forward

  3,249   3,787 

Other, net

  6,176   7,632 

Gross deferred tax assets

 $137,829  $117,685 
         

Deferred Tax Liabilities

        

Deferred loan costs

 $(9,569) $(9,687)

Unrealized gain on interest rate swaps

  (502)  (838)

Unrealized gain on equity securities

  (2,460)  (4,863)

Dividends on Federal Home Loan Bank common stock

  (976)  (977)

Other, net

  (4,712)  (3,916)

Gross deferred tax liabilities

 $(18,219) $(20,281)

Net deferred tax assets

 $119,610  $97,404 

 

Amounts for the current year are based upon estimates and assumptions and could vary from amounts shown on the tax returns as filed.

 

At December 31, 2024, the Company has California NOL carryovers of $33.5 million for which a California deferred tax asset of $3.2 million has been recorded reflecting the expected benefit of these California NOL carryovers.  The annual IRC Section 382 limitation is $7.3 million per year. If not utilized, a portion of the Company’s state NOL’s will begin to expire in 2030. At December 31, 2024, the Company’s federal tax credit carryovers total $28.7 million .  If not utilized, the federal tax credit carryovers will begin to 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 $37.0 million as of December 31, 2024, and $33.7 million as of December 31, 2023. The Company had $20.2 million of tax credits generated in 2024 that will be carried forward to 2025. 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 2021 and by the California Franchise Tax Board back to 2020.  The Company is currently under audit by the California Franchise Tax Board for 2020.  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,

 
  

2024

  

2023

  

2022

 
  

(In thousands)

 

Tax provision at Federal statutory rate

 $66,684   21.0% $84,752   21.0% $99,233   21.0%

State income taxes, net of Federal income tax benefit

  27,432   8.6   36,107   9.0   44,837   9.5 

Excess deduction for stock option and RSUs

  (517)  (0.2)  (586)  (0.1)  (140)  — 

Low income housing and other tax credits

  (63,965)  (20.1)  (73,715)  (18.3)  (34,231)  (7.2)

Other, net

  1,929   0.6   2,900   0.7   2,195   0.4 

Total income tax expense

 $31,563   9.9% $49,458   12.3% $111,894   23.7%