INCOME TAXES

A summary of income tax provision (benefit) follows for the years ended December 31:



	Current		Deferred		Total
	(In thousands)
2013
Federal	$	29,891	$	10,341	$	40,232
State	6,741		5,426		12,167
	$	36,632	$	15,767	$	52,399
2012
Federal	$	35,286	$	5,579	$	40,865
State	7,256		6,289		13,545
	$	42,542	$	11,868	$	54,410
2011
Federal	$	4,154	$	7,614	$	11,768
State	2,810		1,082		3,892
	$	6,964	$	8,696	$	15,660

A reconciliation of the difference between the federal statutory income tax rate and the effective tax rate is shown in the following table for the years ended December 31:



	2013		2012		2011
Statutory tax rate (benefit)	35	%	35	%	35	%
State taxes (benefit)-net of federal tax effect	6	%	6		6	%
CRA investment tax credit	(2	)	(2	)	(3	)
Other	—		1		(1	)
	39	%	40	%	37	%

Deferred tax assets and liabilities at December 31, 2013 and 2012 are comprised of the following:



	2013			2012
	(In thousands)
Deferred tax assets:
Purchase accounting fair value adjustment	$	47,588		$	34,977
Statutory bad debt deduction less than financial statement provision	22,773			26,579
Net operating loss carryforward	5,207			3,901
Capital loss carryforward	—			—
Investment security provision	1,657			1,657
Lease expense	1,393			1,321
State tax deductions	1,505			1,771
Accrued compensation	122			116
Deferred compensation	513			600
Mark to market on loans held for sale	1,876			2,891
Depreciation	3,891			1,362
Nonaccrual loan interest	1,119			782
Other real estate owned	2,162			463
FDIC loss share receivable	576			—
Unrealized loss on securities available for sale	6,445			—
Tax credits	—			—
Non-qualified stock option and restricted unit expense	1,894			2,691
Goodwill	863			1,053
Other	4,441			1,562
	104,025			81,726
Deferred tax liabilities:
FHLB stock dividends	(854		)	(1,095		)
Deferred loan costs	(4,304		)	(2,724		)
State taxes deferred and other	(7,049		)	(7,012		)
Prepaid expenses	(775		)	(1,123		)
FDIC loss share receivable	—			(1,684		)
Amortization of intangibles	(1,693		)	(529		)
Unrealized gain on securities available for sale	—			(7,269		)
Unrealized gain on interest rate swaps	—			0
Unrealized gain on interest only strips	(53		)	(50		)
	(14,728		)	(21,486		)
Valuation allowance on capital loss carryforward	—			—
Net deferred tax assets:	$	89,297		$	60,240

Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management evaluates both positive and negative evidence, including the existence of any cumulative losses in the current year and the prior two years, the amount of taxes paid in available carry-back years, the forecasts of future income, applicable tax planning strategies, and assessments of current and future economic and business conditions. This analysis is updated quarterly and adjusted as necessary.

Based on the analysis, the Company has determined that a valuation allowance for deferred tax assets was not required as of December 31, 2013 and 2012.

A summary of the Company’s net operating loss carry-forwards is as follows:




	FEDERAL					STATE
	Remaining Amount		Expires	Annual Limitation		Remaining Amount		Expires	Annual Limitation
	Remaining Amount		Expires	Annual Limitation		Remaining Amount		Expires	Annual Limitation
	(In thousands)
2013
BBCN Bank	$	—	N/A	$	—	$	124	2016	$	83
Korea First Bank of New York	2,979		2019	497		—		N/A	—
Asiana	450		2015	348		723		2014	348
Center Bank	—		N/A	N/A		13,461		2031	13,356
PIB	7,769			367		—			—
Total	$	11,198		$	1,212	$	14,308		$	13,787

2012
BBCN Bank	$	—	N/A	$	—	$	124	2016	$	83
Korea First Bank of New York	3,476		2019	497		—		N/A	—
Asiana	798		2015	348		723		2014	348
Center Bank	—		N/A	N/A		26,817		2031	$	13,356
Total	$	4,274		$	845	$	27,664		$	13,787

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of the state of California and various other state income taxes. The statute of limitations related to the consolidated Federal income tax return is closed for all tax years up to and including 2009. The expiration of the statute of limitations related to the various state income tax returns that the Company and subsidiaries file, varies by state. The Company is currently under examination by the Internal Revenue Service (“IRS”) for the 2011 tax year and by the California Franchise Tax Board for the 2009 and 2010 tax years. While the outcomes of the examinations are unknown, the Company expects no material adjustments. Examinations by New York City for the 2007, 2008, and 2009 tax years, examinations by California for the 2007 and 2008 tax years, and examinations by IRS for the 2008, 2009, and 2010 tax years were concluded with no material adjustments.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2013 and 2012 is as follows:



	2013			2012
	(In thousands)
Balance at January 1,	$	748		$	569
Additions based on tax positions related to the current year	428			219
Additions based on tax positions related to the prior year	113			(40		)
Additions based on taxing authority examination	997			—
Settlements with taxing authorities	(997		)	—
Balance at December 31,	$	1,289		$	748

The total amount of unrecognized tax benefits was $1,289 thousand at December 31, 2013 and $748 thousand at December 31, 2012 and is primarily for uncertainties related to California enterprise zone loan interest deductions taken in prior years. The total amount of tax benefits that, if recognized, would favorably impact the effective tax rate was $872 thousand and $520 thousand at December 31, 2013 and 2012, respectively. The amount of unrecognized tax benefits increased due to the current year accrual of $428 thousand and additional accrual of $113 thousand for prior years. The Company does not expect the total amount of unrecognized tax benefits to significantly change in the next twelve months.

The Company recognizes interest and penalties related to income tax matters in income tax expense. The Company had approximately $58 thousand and $52 thousand for interest and penalties accrued at December 31, 2013 and 2012, respectively.