XML 33 R19.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes In accordance with the provisions of ASC 740, the Company periodically reviews its income tax positions based on tax laws and regulations and financial reporting considerations, and records adjustments as appropriate. This review takes into consideration the status of current taxing authorities’ examinations of the Company’s tax returns, recent positions taken by the taxing authorities on similar transactions, if any, and the overall tax environment. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
| (in thousands)
Unrecognized tax benefits at beginning of year | $ | 1,039 |  |  | $ | 1,039 |  |  | $ | 934 |
Gross increases for tax positions of prior years | — |  |  | — |  |  | 105 |
Lapse of statute of limitations | (837 | ) |  | — |  |  | — |
Unrecognized tax benefits at end of year | $ | 202 |  |  | $ | 1,039 |  |  | $ | 1,039 |
The total amount of unrecognized tax benefits that would affect our effective tax rate if recognized was $202,000, $1.0 million and $1.0 million as of December 31, 2018, 2017 and 2016, respectively. For the year ended December 31, 2018, unrecognized tax benefits decreased by $837,000 in connection with California Enterprise Zone interest deductions as result of the lapse of the statute of limitations. For the year ended December 31, 2017, unrecognized tax benefits in connection with California Enterprise Zone interest deductions did not change. For the year ended December 31, 2016, unrecognized tax benefits increased by $105,000 in connection with California Enterprise Zone interest deductions. In 2018, 2017 and 2016, the Company accrued interest of $10,000, $34,000 and $33,000 for uncertain tax benefits, respectively. As of December 31, 2018, 2017 and 2016, the total amounts of accrued interest related to uncertain tax positions, net of federal tax benefit, were $57,000, $132,000 and $101,000, respectively. We account for interest and penalties related to uncertain tax positions as part of our provision for federal and state income taxes. Accrued interest and penalties are included within the related tax liability line on the Consolidated Balance Sheets. Unrecognized tax benefit primarily includes state exposures from California Enterprise Zone interest deductions. The Company expects the currently open uncertain tax positions to be settled in the next twelve months. As of December 31, 2018, the Company was subject to examination by various federal and state tax authorities for certain of the years ended December 31, 2008 through 2018. As of December 31, 2018, the Company was subject to audit or examination by Internal Revenue Service for 2013 and California Franchise Tax Board for the 2008 and 2009 tax years. Management does not anticipate any material changes in our financial statements due to the result of the audits. The Company adopted ASU 2016-09, Compensation - Stock Compensation. In accordance with this standard the Company recognizes excess tax benefits as income tax expense or benefit in the income statement. During 2018, the Company recognized $37,000 of increases to taxable income due to shortfalls arising from exercises and vesting. During 2017, the Company recognized $1.8 million of income tax deductions due to excess tax benefits arising from exercises and vesting. In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220). This ASU eliminates the stranded tax effects in other comprehensive income resulting from the Tax Cuts and Jobs Act (the “Tax Act”). Because the amendments only relate to the reclassification of the income tax effects of the Tax Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations was not affected. ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. The Company adopted this standard as of January 1, 2018, and recorded the impact as an adjustment which increased retained earnings by $399,000 as of the date of adoption. A summary of the provision for income taxes was as follows:
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
| (in thousands)
Current expense: |  |  |  |  |
Federal | $ | 13,415 |  |  | $ | 20,924 |  |  | $ | 19,802 |
State | 5,293 |  |  | 6,804 |  |  | 6,503 |
Total current expense | 18,708 |  |  | 27,728 |  |  | 26,305 |
Deferred expense (benefit): |  |  |  |  |
Federal | 3,428 |  |  | 14,623 |  |  | 4,410 |
State | 3,966 |  |  | (1,727 | ) |  | 2,184 |
Total deferred expense | 7,394 |  |  | 12,896 |  |  | 6,594 |
Provision for income taxes | $ | 26,102 |  |  | $ | 40,624 |  |  | $ | 32,899 |
Deferred tax assets and liabilities were as follows:
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
| (in thousands)
Deferred tax assets: |  |  |  |  |
Allowance for loan and lease losses | $ | 10,035 |  |  | $ | 9,282 |  |  | $ | 13,932 |
Depreciation | — |  |  | 192 |  |  | — |
Purchase accounting | 2,724 |  |  | 4,685 |  |  | 7,492 |
Net operating loss carryforward | 17,609 |  |  | 18,648 |  |  | 16,876 |
Unrealized loss on securities available for sale | 2,457 |  |  | 919 |  |  | 1,695 |
Indemnified assets | 1,151 |  |  | 701 |  |  | 1,441 |
Tax credit | 561 |  |  | 1,241 |  |  | 3,516 |
State taxes | 1,138 |  |  | 1,489 |  |  | 2,231 |
Other | 1,804 |  |  | 3,724 |  |  | 5,726 |
Total deferred tax assets | 37,479 |  |  | 40,881 |  |  | 52,909 |
Deferred tax liabilities: |  |  |  |  |
Mark to market | (4,719 | ) |  | (4,879 | ) |  | (3,960 | )
Depreciation | (467 | ) |  | — |  |  | (396 | )
Other | — |  |  | (797 | ) |  | (1,190 | )
Total deferred tax liabilities | (5,186 | ) |  | (5,676 | ) |  | (5,546 | )
Valuation Allowance | (4,852 | ) |  | (2,750 | ) |  | (1,031 | )
Net deferred tax assets | $ | 27,441 |  |  | $ | 32,455 |  |  | $ | 46,332 |
As of December 31, 2018, the Company's net deferred tax assets, which primarily consists of net operating loss carryforwards and the allowance for loan and lease losses, decreased by $5.0 million from 2017 primarily due to the reduction in purchase accounting and an increase in the valuation allowance related to state net operating losses. As of December 31, 2017, the Company’s net deferred tax assets decreased by $13.9 million from 2016 primarily due to the reduction in the allowance for loan and lease losses, tax credits and the impact of the reduction to the federal tax rate resulting from the Tax Act. As of each reporting date, management considers the realization of deferred tax assets based on management’s judgment of various future events and uncertainties, including the timing and amount of future income, as well as the implementation of various tax planning strategies to maximize realization of deferred tax assets. A valuation allowance is provided when it is more likely than not that some portion of deferred tax assets will not be realized. As of December 31, 2018, management determined that a valuation allowance of $4.9 million was appropriate against certain state net operating losses and certain state tax credits. For all other deferred tax assets, management believes it was more likely than not that these deferred tax assets will be realized principally through future taxable income and reversal of existing taxable temporary differences. As of December 31, 2017, management determined a valuation allowance of $2.8 million was appropriate against certain state net operating losses and certain tax credits. Therefore the valuation allowance increased $2.1 million in 2018. As of December 31, 2018, the Company had net operating loss carryforwards of $210.7 million for state income tax purposes, which are available to offset future taxable income, if any, through 2033. As of December 31, 2018, the Company had state low income housing tax credit carryforwards of approximately $204,000. The state low income housing tax credits carry forward indefinitely. Reconciliation between the federal statutory income tax rate and the effective tax rate is shown in the following table:
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
Federal statutory income tax rate | 21.00 | % |  | 35.00 | % |  | 35.00 | %
State taxes, net of federal tax benefits | 9.50 | % |  | 6.64 | % |  | 7.04 | %
Tax-exempt municipal securities | (0.16 | )% |  | (0.24 | )% |  | (0.26 | )%
Tax credit - federal | (2.37 | )% |  | (2.37 | )% |  | (2.50 | )%
Federal rate adjustment, net of federal benefit of state | 1.32 | % |  | 4.18 | % |  | — | %
Other | 1.80 | % |  | (0.58 | )% |  | (2.48 | )%
Effective tax rate | 31.09 | % |  | 42.63 | % |  | 36.80 | %
The Tax Cuts and Jobs Act (the “Tax Act”) was enacted into U.S. tax law on December 22, 2017. The Tax Act makes numerous changes to the U.S. tax code, including (although not limited to) reducing the U.S. federal corporate tax rate to 21 percent, eliminating the corporate alternative minimum tax (AMT), limiting deductible interest expense, increasing limitations on certain executive compensation, and enhancing bonus depreciation to provide for full expensing of qualified property. On that same date, the SEC staff also issued Staff Accounting Bulletin ("SAB") 118, which provided guidance regarding financial statement accounting of the tax effects of the Tax Act. SAB 118 provides for the completion of the accounting related effects of the Tax Act in accordance with a measurement period of one year from the Tax Act enactment date. In 2017, the Company reported certain provisional amounts based on reasonable estimates as permitted under SAB 118 for which the accounting under ASC 740 was incomplete. Upon filing the 2017 income tax returns in 2018, the Company recorded a change of $1.1 million to the provisional amount related to the re-measurement of the ending deferred tax assets and liabilities from 35% to 21%. During the fourth quarter of 2018, the Company has completed the accounting required under ASC 740.

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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration