Note 12 - Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Text Block]

12.   Income Taxes

For the years ended December 31, 2012, 2011, and 2010, the current and deferred amounts of the income tax expense are summarized as follows:

	2012		2011		2010
	(In thousands)
Current:
Federal	$	44,263	$	26,548	$	16,496
State		17,081		10,905		7,379
	$	61,344	$	37,453	$	23,875
Deferred:
Federal		3,755		10,133		(28,600	)
State		1,029		3,675		(9,904	)
	$	4,784	$	13,808	$	(38,504	)
Total income tax expense/(benefit	$	66,128	$	51,261	$	(14,629	)

Temporary differences between the amounts reported in the financial statements and the tax basis of assets and liabilities give rise to deferred taxes.  Net deferred tax assets at December 31, 2012, and at December 31, 2011, are included in other assets in the accompanying Consolidated Balance Sheets and are as follows:

Deferred Tax Assets
Loan loss allowance, due to differences in computation of bad debts	$	100,774		$	109,686
Write-down on equity securities		3,374			3,609
Stock option compensation expense		16,120			16,048
State tax		4,479			3,744
Non-accrual interest		3,208			2,048
Write-down on other real estate owned		10,302			14,148
Accural for litigation		2,415			-
Unrealized loss on interest rate swaps		-			1,097
Unrealized loss on securities available-for-sale, net		-			6,311
Other, net		3,544			3,536
Gross deferred tax assets		144,216			160,227
Deferred Tax Liabilities
Core deposit intangibles		(1,632	)		(3,919	)
Investment in aircraft financing trust and venture capital partnerships		(19,684	)		(21,628	)
Unrealized gain on securities available-for-sale, net		(338	)		-
Dividends on Federal Home Loan Bank common stock		(3,071	)		(2,788	)
Other, net		(5,084	)		(5,646	)
Gross deferred tax liabilities		(29,809	)		(33,981	)
Valuation allowance		(2,125	)		(2,533	)
Net deferred tax assets	$	112,282		$	123,713

Amounts for the current year are based upon estimates and assumptions and could vary from amounts shown on the tax returns as filed.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the 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 assets are deductible, management believes it is more likely than not the Company will realize all benefits related to these deductible temporary differences except for $2.1 million of state deferred taxes for a portion of the capital losses related to the Company’s former investments in the preferred stock of Fannie Mae and Freddie Mac.

As of December 31, 2012, the Company had income tax refunds receivable of $12.4 million. As of December 31, 2011, the Company had income tax receivables of approximately $39.3 million, of which $11.2 million relates to the carryback of the Company’s net operating loss for 2009 to the 2007 tax year and $9.1 million relates to the carryback of the Company’s low income housing tax credits for 2009 to the 2008 tax year. These income tax receivables are included in other assets in the accompanying Consolidated Balance Sheets.

At December 31, 2012, the Company had Federal net operating loss carry forwards of approximately $1.6 million which expire through 2022.  The Federal net operating loss carry-forwards were acquired in connection with the Company’s acquisition of United Heritage Bank.

At December 31, 2012 and 2011, the amount of unrecognized tax benefits was none and $508,000, respectively. During 2012, the Company reversed its unrecognized tax benefits during the filing of the Company’s 2011 tax returns, During 2011, the Company paid $0.1 million of state taxes previously recorded in unrecognized tax benefits. The Company had accrued interest and penalties of less than $0.1 million at December 31, 2012 and 2011.

The Company’s tax returns are open for audits by the Internal Revenue Service back to 2010 and by the FTB of the State of California back to 2003.  The Company is under audit by the CaliforniaFranchise Tax Board for the years 2003 to 2007.  As the Company is presently under audit by a number of tax authorities, it is reasonably possible that unrecognized tax benefits could change significantly over the next twelve months. The Company does not expect that any such changes would have a material impact on its annual effective tax rate.

        Income tax expense results in effective tax rates that differ from the statutory Federal income tax rate for the years indicated as follows:

	2012					2011					2010
	(In thousands)
Tax provision at Federal statutory rate	$	64,248		35.0	%	$	52,994		35.0	%	$	(1,072	)	35.0	%
State income taxes, net of Federal income tax benefit		11,772		6.4			9,477		6.3			(1,641	)	53.5
Interest on obligations of state and political subdivisions, which are exempt from Federal taxation		(1,456	)	(0.8	)		(1,476	)	(1.0	)		(299	)	9.8
Low income housing and other tax credits		(9,353	)	(5.1	)		(10,087	)	(6.6	)		(11,220	)	366.2
Other, net		917		0.5			353		0.2			(397	)	13.0
Total income tax expense/(benefit)	$	66,128		36.0	%	$	51,261		33.9	%	$	(14,629	)	477.5	%