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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | 10. INCOME TAXES The current and deferred amounts of income tax expense consist of the following.
|  | Year Ended December 31, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
|  | (Dollars in thousands) |
Current provision: |  |  |  |  |  |  |  |  |
Federal |  | $ | 63,257 |  |  | $ | 60,763 |  |  | $ | 44,514 |
State |  |  | 35,077 |  |  |  | 35,427 |  |  |  | 27,526 |
|  |  | 98,334 |  |  |  | 96,190 |  |  |  | 72,040 |
Deferred provision: |  |  |  |  |  |  |  |  |
Federal |  |  | (2,913 | ) |  |  | (2,496 | ) |  |  | 8,782 |
State |  |  | (1,422 | ) |  |  | (772 | ) |  |  | 4,305 |
|  |  | (4,335 | ) |  |  | (3,268 | ) |  |  | 13,087 |
Total |  | $ | 93,999 |  |  | $ | 92,922 |  |  | $ | 85,127 |
Income tax asset consists of the following.
|  | December 31, |
|  | 2023 |  |  | 2022 |
|  | (Dollars in thousands) |
Current: |  |  |  |  |  |
Federal |  | $ | (10,094 | ) |  | $ | 1,740 |
State |  |  | (1,722 | ) |  |  | 658 |
|  |  | (11,816 | ) |  |  | 2,398 |
Deferred: |  |  |  |  |  |
Federal |  |  | 112,481 |  |  |  | 117,698 |
State |  |  | 63,303 |  |  |  | 66,588 |
|  |  | 175,784 |  |  |  | 184,286 |
Total |  | $ | 163,968 |  |  | $ | 186,684 |
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, |
|  | 2023 |  |  | 2022 |
|  | (Dollars in thousands) |
Deferred tax assets: |  |  |  |  |  |
Bad debt and credit loss deduction |  | $ | 30,038 |  |  | $ | 29,648 |
Net operating loss carryforward |  |  | 3,711 |  |  |  | 4,701 |
Deferred compensation |  |  | 6,849 |  |  |  | 6,768 |
PCI loans |  |  | 54 |  |  |  | 51 |
Accrued expense |  |  | 7,257 |  |  |  | 5,678 |
Unrealized loss on investment securities, net |  |  | 145,404 |  |  |  | 159,229 |
Acquired loan discounts |  |  | 3,061 |  |  |  | 4,288 |
Lease liability |  |  | 7,505 |  |  |  | 7,541 |
Other, net |  |  | 1,816 |  |  |  | 2,251 |
Gross deferred tax asset |  |  | 205,695 |  |  |  | 220,155 |
Deferred tax liabilities: |  |  |  |  |  |
California franchise tax |  |  | 5,921 |  |  |  | 6,568 |
Depreciation |  |  | 2,950 |  |  |  | 3,762 |
Intangibles - acquisitions |  |  | 7,714 |  |  |  | 11,591 |
FHLB Stock |  |  | 2,545 |  |  |  | 2,545 |
Deferred income |  |  | 3,886 |  |  |  | 4,177 |
Right of use asset |  |  | 6,895 |  |  |  | 7,226 |
Gross deferred tax liability |  |  | 29,911 |  |  |  | 35,869 |
Net deferred tax asset |  | $ | 175,784 |  |  | $ | 184,286 |
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, |
|  | 2023 |  |  | 2022 |  |  | 2021 |
|  | Amount |  |  | Percent |  |  | Amount |  |  | Percent |  |  | Amount |  |  | Percent |
|  | (Dollars in thousands) |
Federal income tax at statutory rate |  | $ | 66,241 |  |  |  | 21.0 | % |  | $ | 68,953 |  |  |  | 21.0 | % |  | $ | 62,506 |  |  |  | 21.0 | %
State franchise taxes, net of federal benefit |  |  | 25,139 |  |  |  | 8.0 | % |  |  | 27,256 |  |  |  | 8.3 | % |  |  | 24,600 |  |  |  | 8.3 | %
State impact of BOLI surrender, net of federal benefit |  |  | 1,489 |  |  |  | 0.5 | % |  |  | — |  |  |  | 0.0 | % |  |  | — |  |  |  | 0.0 | %
Federal impact of BOLI surrender and MEC penalty |  |  | 5,486 |  |  |  | 1.7 | % |  |  | — |  |  |  | 0.0 | % |  |  | — |  |  |  | 0.0 | %
Tax-exempt income |  |  | (5,146 | ) |  |  | (1.6 | )% |  |  | (3,290 | ) |  |  | (1.0 | )% |  |  | (3,165 | ) |  |  | (1.1 | )%
Tax credits |  |  | (1,239 | ) |  |  | (0.4 | )% |  |  | (1,617 | ) |  |  | (0.5 | )% |  |  | (1,640 | ) |  |  | (0.6 | )%
Other, net |  |  | 2,029 |  |  |  | 0.6 | % |  |  | 1,620 |  |  |  | 0.5 | % |  |  | 2,826 |  |  |  | 1.0 | %
Provision for income taxes |  | $ | 93,999 |  |  |  | 29.8 | % |  | $ | 92,922 |  |  |  | 28.3 | % |  | $ | 85,127 |  |  |  | 28.6 | %
The Company invests in low income housing tax credit and solar tax funds that are designed to generate a return primarily through the realization of federal tax credits. The Company accounts for these investments by amortizing the cost of tax credit investments over the life of the investment using a proportional amortization method and tax credit investment amortization expense is a component of the provision for income taxes. Refer to Note 3 – Summary of Significant Accounting Policies contained herein for a more detailed discussion concerning the adoption of 2023-02, Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method in 2023. For the year ended December 31, 2023, tax credits and other benefits recognized was $12.2 million and the tax credit amortization expense included in the provision for income taxes was $14.1 million. There were no significant unrecognized tax benefits at December 31, 2023 and 2022. 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 and Arizona. 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, 2023, the Company has net operating loss (NOLs) carryforwards of approximately $11.4 million for federal and $12.1 million California tax purposes, as a result of the acquisition of Suncrest Bank. The federal and California NOLs of approximately $9.5 and $7.1 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 $314,000 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, 2023. 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.

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