INCOME AND FRANCHISE TAXES

3 Months Ended

Mar. 31, 2015

15. INCOME AND FRANCHISE TAXES

In assessing the need for a valuation allowance on our deferred tax assets (“DTA”), management considers whether it is more likely than not that some portion or all of the DTA will not be realized. The ultimate realization of DTA is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income and tax-planning strategies in making this assessment.

At March 31, 2015, the Company had net operating loss carryforwards for Federal income tax purposes of $117.9 million, that are available to offset future Federal taxable income, if any, through 2030. At March 31, 2015, the Company had net operating loss carryforwards for Hawaii and California state income tax purposes of $82.7 million and $39.5 million, respectively, which are available to offset future state taxable income, if any, through 2030. In addition, the Company has state tax credit carryforwards of $14.8 million that do not expire, and federal tax credit carryforwards of $16.6 million, of which $13.7 million will expire within 20 years, and $2.9 million will not expire.

Income tax expense for the periods presented differed from the “expected” tax expense (computed by applying the U.S. Federal corporate tax rate of 35% to income (loss) before income taxes) for the following reasons:

	Three months ended March 31,
	2015			2014
	(Dollars in thousands)

Computed “expected” tax expense	$	5,654		$	5,364
Increase (decrease) in taxes resulting from:
Tax-exempt interest	(352		)	(351		)
Other tax-exempt income	(236		)	(235		)
Income tax credits	(327		)	(195		)
State income taxes, net of Federal income tax effect, excluding impact of deferred tax valuation allowance	739			600
Change in the beginning-of-the-year balance of the valuation allowance for deferred tax assets allocated to income tax expense	18			135
Other	263			200
Total	$	5,759		$	5,518

- 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.

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