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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES The following presents a summary of income tax provision follows for the years ended December 31:
| Current |  | Deferred |  | Total
| (Dollars in thousands)
2018 |  |  |  |  |
Federal | $ | 35,401 |  |  | $ | 2,336 |  |  | $ | 37,737 |
State | 27,749 |  |  | 406 |  |  | 28,155 |
| $ | 63,150 |  |  | $ | 2,742 |  |  | $ | 65,892 |
2017 |  |  |  |  |
Federal | $ | 64,910 |  |  | $ | 31,464 |  |  | $ | 96,374 |
State | 24,739 |  |  | 3,276 |  |  | 28,015 |
| $ | 89,649 |  |  | $ | 34,740 |  |  | $ | 124,389 |
2016 |  |  |  |  |
Federal | $ | 50,780 |  |  | $ | 4,198 |  |  | $ | 54,978 |
State | 20,922 |  |  | 1,552 |  |  | 22,474 |
| $ | 71,702 |  |  | $ | 5,750 |  |  | $ | 77,452 |
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”). Among other changes, the Tax Act reduces the U.S. federal corporate tax rate from 35% to 21%. The Company estimated the effects of the Tax Act and recorded a provisional amount increasing income tax expense by $25.4 million for the year ended December 31, 2017 in accordance with SEC Staff Accounting Bulletin No. 118 (“SAB 118”). This amount was comprised of the remeasurement of federal net deferred tax assets and impairment of the low-income housing investment, resulting from the permanent reduction in the U.S. statutory corporate tax rate to 21% from 35%. As required by SAB 118, the Company continued to reassess and refine the effects of the Tax Act on its deferred tax amounts during 2018. As a result, the Company recorded an income tax expense of $442 thousand during the year ended December 31, 2018. As of December 31, 2018, the Company completed the accounting for the income tax effects of the Tax Act. 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 indicated:
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
Statutory tax rate | 21.00 | % |  | 35.00 | % |  | 35.00 | %
State taxes-net of federal tax effect | 8.56 | % |  | 7.04 | % |  | 7.28 | %
Rate change - federal and state | 0.17 | % |  | 9.36 | % |  | — | %
CRA investment tax credit | (3.96 | )% |  | (3.50 | )% |  | (2.40 | )%
Bank owned life insurance | (0.20 | )% |  | (0.09 | )% |  | (0.26 | )%
Tax exempt municipal bonds and loans | (0.21 | )% |  | (0.45 | )% |  | (0.22 | )%
Nondeductible transaction costs | — | % |  | (0.02 | )% |  | 0.80 | %
Other | 0.43 | % |  | (0.19 | )% |  | 0.31 | %
Effective income tax rate | 25.79 | % |  | 47.15 | % |  | 40.51 | %
Deferred tax assets and liabilities at December 31, 2018 and 2017 are comprised of the following:
| At December 31,
| 2018 |  | 2017
| (Dollars in thousands)
Deferred tax assets: |  |  |
Purchase accounting fair value adjustment | $ | 16,239 |  |  | $ | 21,508 |
Statutory bad debt deduction less than financial statement provision | 22,904 |  |  | 20,162 |
Net operating loss carry-forward | 2,092 |  |  | 2,351 |
Investment security provision | 593 |  |  | 593 |
State tax deductions | 4,240 |  |  | 4,304 |
Accrued compensation | 148 |  |  | 149 |
Deferred compensation | 175 |  |  | 214 |
Mark to market on loans held for sale | 260 |  |  | 764 |
Depreciation | 202 |  |  | 221 |
Nonaccrual loan interest | 6,027 |  |  | 6,272 |
Other real estate owned | 585 |  |  | 1,753 |
FDIC loss share receivable | — |  |  | 362 |
Unrealized loss on securities available for sale | 13,631 |  |  | 8,961 |
Non-qualified stock option and restricted share expense | 1,420 |  |  | 1,339 |
Goodwill | 117 |  |  | 203 |
Lease expense | 60 |  |  | — |
Other | 2,013 |  |  | 3,053 |
Total Deferred Tax Assets | $ | 70,706 |  |  | $ | 72,209 |
Deferred tax liabilities: |  |  |
FHLB stock dividends | $ | (617 | ) |  | $ | (695 | )
Deferred loan costs | (6,816 | ) |  | (5,857 | )
State taxes deferred and other | (2,655 | ) |  | (3,229 | )
Prepaid expenses | (1,802 | ) |  | (1,542 | )
Amortization of intangibles | (4,524 | ) |  | (5,236 | )
Lease expense | — |  |  | (447 | )
Other | (3,379 | ) |  | — |
Total Deferred Tax Liabilities | $ | (19,793 | ) |  | $ | (17,006 | )
Net deferred tax assets: | $ | 50,913 |  |  | $ | 55,203 |
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, 2018 and 2017. 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
|  | (Dollars in thousands)
| 2018 |  |  |  |  |  |  |  |  |  |  |
| Saehan Bank (acquired by Wilshire) | $ | 2,714 |  |  | 2030 |  | $ | 226 |  |  | $ | 2,714 |  |  | 2030 |  | $ | 226 |
| Korea First Bank of New York | 494 |  |  | 2019 |  | 497 |  |  | — |  |  | N/A |  | — |
| Pacific International Bank | 5,669 |  |  | 2032 |  | 420 |  |  | — |  |  | N/A |  | — |
| Total | $ | 8,877 |  |  |  |  | $ | 1,143 |  |  | $ | 2,714 |  |  |  |  | $ | 226 |
| 2017 |  |  |  |  |  |  |  |  |  |  |
| Saehan Bank (acquired by Wilshire) | $ | 2,940 |  |  | 2030 |  | $ | 226 |  |  | $ | 2,940 |  |  | 2030 |  | $ | 226 |
| Korea First Bank of New York | 991 |  |  | 2019 |  | 497 |  |  | — |  |  | N/A |  | — |
| Pacific International Bank | 6,089 |  |  | 2032 |  | 420 |  |  | — |  |  | N/A |  | — |
| Total | $ | 10,020 |  |  |  |  | $ | 1,143 |  |  | $ | 2,940 |  |  |  |  | $ | 226 |
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 states. The statute of limitations for the assessment of taxes for the consolidated Federal income tax return is closed for all tax years up to and including 2014. The expiration of the statute of limitations for the assessment of taxes for the various state income and franchise tax returns for the Company and subsidiaries varies by state. The Company is currently under examination by the California Franchise Tax Board (FTB) for the 2011, 2012 and 2013 tax years. Wilshire Bancorp Inc. is currently under examination by the FTB for the 2011, 2012, and 2013 tax years. While the outcomes of the examinations are unknown, the Company does not expect any material adjustments. A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2018 and 2017 is as follows:
| At December 31,
| 2018 |  | 2017
| (Dollars in thousands)
Balance at January 1, | $ | 2,125 |  |  | $ | 2,187 |
Additions based on tax positions related to prior years | 247 |  |  | 3 |
Expiration of the statute of limitations for assessment of taxes | — |  |  | — |
Settlements with taxing authorities | (58 | ) |  | (65 | )
Balance at December 31, | $ | 2,314 |  |  | $ | 2,125 |
The total amount of unrecognized tax benefits was $2.3 million at December 31, 2018 and $2.1 million at December 31, 2017 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 $2.2 million and $1.9 million at December 31, 2018 and 2017, respectively. The Company expects the total amount of unrecognized tax benefits to decrease by $2.3 million within the next twelve months due to settlement with the state tax authority. The Company recognizes interest and penalties related to income tax matters in income tax expense. The Company had approximately $470 thousand and $348 thousand for interest and penalties accrued at December 31, 2018 and 2017, respectively.

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- 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 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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