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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES

The current and deferred amounts of income tax expense consist of the following.

 

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

 

 

(Dollars in thousands)

 

Current provision:

 

 

 

 

 

 

 

 

 

Federal

 

$

60,763

 

 

$

44,514

 

 

$

48,328

 

State

 

 

35,427

 

 

 

27,526

 

 

 

28,469

 

 

 

 

96,190

 

 

 

72,040

 

 

 

76,797

 

Deferred provision:

 

 

 

 

 

 

 

 

 

Federal

 

 

(2,496

)

 

 

8,782

 

 

 

(2,997

)

State

 

 

(772

)

 

 

4,305

 

 

 

(1,439

)

 

 

 

(3,268

)

 

 

13,087

 

 

 

(4,436

)

Total

 

$

92,922

 

 

$

85,127

 

 

$

72,361

 

 

Income tax asset consists of the following.

 

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(Dollars in thousands)

 

Current:

 

 

 

 

 

 

Federal

 

$

1,740

 

 

$

5,452

 

State

 

 

658

 

 

 

2,150

 

 

 

 

2,398

 

 

 

7,602

 

Deferred:

 

 

 

 

 

 

Federal

 

 

117,698

 

 

 

16,500

 

State

 

 

66,588

 

 

 

8,501

 

 

 

 

184,286

 

 

 

25,001

 

Total

 

$

186,684

 

 

$

32,603

 

 

 

 

Temporary differences between the amounts reported in the financial statements and the tax bases of assets and liabilities resulted in deferred taxes. The components of the net deferred tax asset are as follows.

 

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(Dollars in thousands)

 

Deferred tax assets:

 

 

 

 

 

 

Bad debt and credit loss deduction

 

$

29,648

 

 

$

23,228

 

Net operating loss carryforward

 

 

4,701

 

 

 

—

 

Deferred compensation

 

 

6,768

 

 

 

6,367

 

PCI loans

 

 

51

 

 

 

657

 

California franchise tax

 

 

—

 

 

 

3,873

 

Accrued expense

 

 

5,678

 

 

 

5,071

 

Unrealized loss on investment securities, net

 

 

159,229

 

 

 

423

 

Acquired loan discounts

 

 

4,288

 

 

 

5,863

 

Lease liability

 

 

7,541

 

 

 

6,472

 

Other, net

 

 

2,251

 

 

 

1,784

 

Gross deferred tax asset

 

 

220,155

 

 

 

53,738

 

Deferred tax liabilities:

 

 

 

 

 

 

California franchise tax

 

 

6,568

 

 

 

—

 

Depreciation

 

 

3,762

 

 

 

3,443

 

Intangibles - acquisitions

 

 

11,591

 

 

 

12,812

 

FHLB Stock

 

 

2,545

 

 

 

2,525

 

Deferred income

 

 

4,177

 

 

 

3,825

 

Right of use asset

 

 

7,226

 

 

 

6,132

 

Unrealized gain on investment securities, net

 

 

—

 

 

 

—

 

Gross deferred tax liability

 

 

35,869

 

 

 

28,737

 

Net deferred tax asset

 

$

184,286

 

 

$

25,001

 

 

Annual Effective Tax Rate

The annual consolidated effective tax rate for the periods presented, is reconciled to the U.S. statutory income rate as follows.

 

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

 

2020

 

 

 

Amount

 

 

Percent

 

 

Amount

 

 

Percent

 

 

Amount

 

 

Percent

 

 

 

(Dollars in thousands)

 

Federal income tax at statutory rate

 

$

68,953

 

 

 

21.0

%

 

$

62,506

 

 

 

21.0

%

 

$

52,399

 

 

 

21.0

%

State franchise taxes, net of federal benefit

 

 

27,256

 

 

 

8.3

%

 

 

24,600

 

 

 

8.3

%

 

 

20,950

 

 

 

8.4

%

Tax-exempt income

 

 

(3,290

)

 

 

(1.0

)%

 

 

(3,165

)

 

 

(1.1

)%

 

 

(3,191

)

 

 

(1.3

)%

Tax credits

 

 

(1,617

)

 

 

(0.5

)%

 

 

(1,640

)

 

 

(0.6

)%

 

 

(1,946

)

 

 

(0.8

)%

Other, net

 

 

1,620

 

 

 

0.5

%

 

 

2,826

 

 

 

1.0

%

 

 

4,149

 

 

 

1.7

%

Provision for income taxes

 

$

92,922

 

 

 

28.3

%

 

$

85,127

 

 

 

28.6

%

 

$

72,361

 

 

 

29.0

%

 

There were no significant unrecognized tax benefits at December 31, 2022 and 2021. We do not expect the total amount of unrecognized tax benefits to significantly increase or decrease within the next twelve months.

The Company is subject to income taxes in the federal, California, Arizona, and three other non-material jurisdictions. The Company is no longer subject to examinations by taxing jurisdictions for periods before 2019, with the exception of California, for which the Company is no longer subject to examination for years before 2013.

At December 31, 2022, the Company has net operating loss (NOLs) carryforwards of approximately $14.8 million for federal and California tax purposes as a result of the acquisition of Suncrest Bank. The federal and California NOLs of $12.7 and $9.8 million, respectively, are subject to annual IRC Section 382 limitations of $3.4 million and have no expiration for federal tax purposes but will expire in 2032 for California if not utilized. The balance of the NOLs are subject to annual IRC Section 382 limitations of $300,000 and will begin to expire in 2030.

The Company considered the need for a valuation allowance on its deferred tax assets for the year ended December 31, 2022. The Company considered income in prior periods, projected future income, and projected future reversals of deferred tax items in making the determination that the deferred tax assets are more likely than not to be realized.