XML 38 R24.htm IDEA: XBRL DOCUMENT
v3.7.0.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2016
Income Taxes [Abstract] |
Income Taxes | NOTE 17 — INCOME TAXES The Company is subject to the dispositions of the 2011 Puerto Rico Internal Revenue Code, as amended (the "Code"). T he Code imposes a maximum corporate tax rate of 39%. T he Company maintained a lower effective tax rate for the years ended December 31, 2016, 2015 and 2014. Under Puerto Rico law, all companies are treated as separate taxable entities and are not entitled to file consolidated tax returns. The Company and its subsidiaries are subject to Puerto Rico reg ular income tax or the alternative minimum tax (“AMT”) on income earned from all sources. The AMT is payable if it exceeds regular income tax. The excess of AMT over regular income tax paid in any one year may be used to offset regular income tax in future years, subject to certain limitations. The components of income tax expense (benefit) for the years ended December 31, 2016, 2015 and 2014 are as follows
| Year Ended December 31,
| 2016 |  | 2015 |  |  | 2014
| (In thousands)
Current income tax expense | $ | 2,768 |  | $ | 19,775 |  | $ | 13,097
Deferred income tax expense (benefit) |  | 23,226 |  |  | (37,329) |  |  | 24,155
Total income tax expense (benefit) | $ | 25,994 |  | $ | (17,554) |  | $ | 37,252
In relation to the exempt income level, for 2016, 2015, and 2014 the Bank’s investment securities portfolio and loans portfolio generated net tax-exempt interest income of $10.0 million, $17.6 million, and $40.5 million, respectively. OIB generated exempt income of $10.3 million, $6.3 million and $16.5 million for the years ended 2016, 2015 and 2014, respectively. The Company’s income tax expense differs from amounts computed by applying the applicable statutory rate to income (loss) before income taxe s as follow:
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
| Amount |  | Rate |  | Amount |  | Rate |  | Amount | Rate
| (Dollars in thousands)
Income tax expense (benefit) at statutory rates | $ | 33,220 |  | 39.00% |  | $ | (7,823) |  | -39.00% |  | $ | 47,749 |  | 39.00%
Tax effect of exempt and excluded income, net |  | (11,178) |  | -13.12% |  |  | (8,625) |  | -43.00% |  |  | (10,002) |  | -26.85%
Disallowed net operating loss carryover |  | 1,406 |  | 1.65% |  |  | 556 |  | 2.77% |  |  | 8,289 |  | 22.25%
Change in valuation allowance |  | (9) |  | -0.01% |  |  | (2,219) |  | -11.06% |  |  | (958) |  | -2.57%
Release of unrecognized tax benefits, net |  | (135) |  | -0.16% |  |  | (385) |  | -1.92% |  |  | (1,093) |  | -2.94%
Loan tax basis change effect |  | - |  | 0.00% |  |  | - |  | 0.00% |  |  | (7,642) |  | -20.51%
Capital (gain) loss at preferential rate |  | 2,394 |  | 2.81% |  |  | 283 |  | 1.41% |  |  | - |  | 0.00%
Other items, net |  | 296 |  | 0.34% |  |  | 659 |  | 3.28% |  |  | 909 |  | 2.00%
Income tax expense (benefit) | $ | 25,994 |  | 30.51% |  | $ | (17,554) |  | -87.52% |  | $ | 37,252 |  | 10.82%
The Company classifies unrecognized tax benefits in income taxes payable. These gross unrecognized tax benefits would affect the effective tax rate if realized. At December 31, 2016 the amount of unrecognized tax benefits was $2.0 million (December 31, 2015 - $2.2 million). The Company had accrued $229 thousand at December 31, 2016 (December 31, 2015 - $175 thousand) for the payment of interest and penalties relating to unrecognized tax benefits. During 2016, $1.4 million was released ba sed on the application of the statute of limitations, and an a dditional accrual of $1.1 million was recorded due to other tax positions taken by management. The following table presents a reconciliation of unrecognized tax benefits:
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
| In thousands)
Balance at beginning of year | $ | 2,175 |  |  | $ | 2,560 |  |  | $ | 4,042 |
Additions for tax positions of prior years |  | 229 |  |  |  | 175 |  |  |  | 187 |
Additions (reductions) due to new tax positions |  | 999 |  |  |  | (560) |  |  |  | (1,388) |
Reduction for tax positions as a result of lapse of statute of limitations |  | (1,363) |  |  |  | - |  |  |  | (281) |
Balance at end of year | $ | 2,040 |  |  | $ | 2,175 |  |  | $ | 2,560 |
The amount of unrecognized tax benefits may increase or decrease in the future for various reasons including adding amounts for current tax year positions, expiration of open income tax returns due to the statute of limitations, changes in management’s judgment about the level of uncertainty, status of examinations, litigation and legislative activity, and the addition elimination of uncertain tax positions. The determination of deferred tax expense or benefit is based on changes in the carrying amounts of assets and liabilities that generate temporary differences. The carrying value of the Company’s net deferred tax assets assumes that the Company will be able to generate sufficient future taxable income based on estimates and assumptions. If these estim ates and related assumptions change in the future, the Company may be required to record valuation allowances against its deferred tax assets resulting in additional income tax expense in the consolidated statements of operations.
| December 31,
| 2016 |  | 2015
| (In thousands)
Deferred tax asset: |  |  |  |  |
Allowance for loan and lease losses and other reserves | $ | 84,959 |  | $ | 129,234
Loans and other real estate valuation adjustment |  | 11,120 |  |  | 10,759
Net capital and operating loss carry forwards |  | 9,686 |  |  | 11,043
Alternative minimum tax |  | 15,799 |  |  | 16,240
Deposit and borrowings valuation adjustment |  | - |  |  | 133
Unrealized net loss included in other comprehensive income |  | 725 |  |  | 1,680
S&P option contracts |  | - |  |  | 393
Acquired portfolio |  | 36,237 |  |  | 37,523
FDIC shared-loss indemnification asset |  | 5,344 |  |  | 2,802
Other assets allowances |  | 1,547 |  |  | 1,547
Other deferred tax assets |  | 4,391 |  |  | 5,612
Total gross deferred tax asset |  | 169,808 |  |  | 216,966
Less: valuation allowance |  | (3,133) |  |  | (3,142)
Net gross deferred tax assets |  | 166,675 |  |  | 213,824
Deferred tax liability: |  |  |  |  |
FDIC-assisted acquisition, net |  | (25,862) |  |  | (47,956)
Customer deposit and customer relationship intangibles |  | (2,402) |  |  | (3,057)
Loans and building valuation adjustment |  | (9,522) |  |  | (9,991)
Unrealized net gain on available-for-sale securities |  | - |  |  | (2,566)
Servicing asset |  | (3,844) |  |  | (2,907)
Other deferred tax liabilities |  | (845) |  |  | (1,446)
Total gross deferred tax liabilities |  | (42,475) |  | $ | (67,923)
Net deferred tax asset | $ | 124,200 |  | $ | 145,901
In assessing the realizability of the deferred tax asset, management considers whether it is more likely than not that some portion or the entire deferred tax asset will not be realized. The ultimate realization of the deferred tax asset is dependent upon the generation of future taxab le income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, 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 asset are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences, net of the existing valuation allowances at December 31, 2016. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry-forward period are re duced. The Company and its subsidiaries have operating loss carry-forwards for income tax purposes which are available to offset future taxable income and capital gains and are available until December 2025. The se operating loss carry-forwa rds amount to approximately $9.5 million as of December 31, 2016. The Company follows a two-step approach for recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for reco gnition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals of litigation processes, if any. The second step is to measure the t ax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration