11.	Income Taxes

For the years ended

December 31, 2018,

2017,

and

2016,

the current and deferred amounts of the income tax expense are summarized as follows:

	Year Ended December 31,
	2018		2017		2016
	(In thousands)
Current:
Federal	$	26,820	$	59,433	$	28,788
State		36,639		28,278		22,364
Total Current	$	63,459	$	87,711	$	51,152

Deferred:
Federal	$	1,495	$	31,818		11,775
State		848		2,736		4,174
Total Deferred	$	2,343	$	34,554	$	15,949

Total income tax expense	$	65,802	$	122,265	$	67,101

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, 2018,

and at

December 31, 2017,

are included in other assets in the accompanying Consolidated Balance Sheets and are as follows:

	As of December 31,
	2018			2017
	(In thousands)
Deferred Tax Assets
Loan loss allowance, due to differences in computation of bad debts	$	37,567		$	37,157
Share-based compensation		3,260			2,630
Non-accrual interest		2,277			2,100
Write-down on equity securities and venture capital investments		2,095			2,561
Depreciation and amortization		3,798			1,564
State tax		4,344			6,783
Unrealized loss on interest rate swaps		190			1,158
Unrealized loss on securities available-for-sale, net		3,864			198
Unrealized loss on equity securities		843			-
Basis difference in acquired assets		622			1,676
Tax credits carried forward		9,473			9,278
Net operating loss carried forward		17,163			18,375
Other, net		4,095			4,291
Gross deferred tax assets		89,591			87,771

Deferred Tax Liabilities
Deferred loan costs		(8,839	)		(7,655	)
Dividends on Federal Home Loan Bank common stock		(956	)		(1,021	)
Other, net		(4,008	)		(3,758	)
Gross deferred tax liabilities		(13,803	)		(12,434	)
Net deferred tax assets	$	75,788		$	75,337

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

As of

December 31, 2018.

The Company’s gross NOL carryovers, all of which are subject to limitation under Section

382

of the Internal Revenue Code, totaled approximately

$53.6

million for which a deferred tax asset of

$11.2

million has been recorded reflecting the expected benefit of these Federal NOL carryovers. At

December 31, 2018,

the Company has California NOL carryovers of

$63.1

million for which a California deferred tax asset of

$6.9

million has been recorded reflecting the expected benefit of these California NOL carryovers. The annual IRC Section

382

limitation is

$10.1

million per year until

2021

and decreases to

$8.8

million in

2022

and to

$7.2

million per year thereafter. If

not

utilized, a portion of the Company’s federal and state NOL’s will begin to expire in

2030.

December 31, 2018,

the Company’s federal tax credit carryovers and AMT tax credit carryovers total

$7.7

million and

$1.1

million, respectively. If

not

utilized, the federal tax credit carryovers will begin in expire in

2028.

The AMT tax credit carryovers can be carried forward indefinitely. In management’s opinion, it is more-likely-than

not

that the results of future operations will generate sufficient taxable income to utilize all of the deferred tax benefits related to those NOL and tax credit carryovers.

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.

The Company had income tax refunds receivables of

$9.0

million at

December 31, 2018,

and

$7.2

million at

December 31, 2017.

These income tax receivables are included in other assets in the accompanying Consolidated Balance Sheets.

December 22, 2017,

the Tax Cuts and Jobs Act, was enacted into law and as a result, during the

fourth

quarter of

2017,

the Company recorded

$23.4

million of additional income tax expense related to the revaluation of the Company’s deferred tax assets and a

$2.6

million pretax write-down of low-income housing tax credit investments.

The Company’s tax returns are open for audits by the Internal Revenue Service back to

2015

and by the California Franchise Tax Board back to

2014.

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:

	Year Ended December 31,
	2018					2017					2016
	(Dollars in thousands)
Tax provision at Federal statutory rate	$	70,914		21.0	%	$	104,407		35.0	%	$	84,770		35.0	%
State income taxes, net of Federal income tax benefit		29,750		8.8			20,616		6.9			17,250		7.1
Deferred taxes write-down due to Tax Cuts and Jobs Act		-		-			23,365		7.8			-		-
Excess deduction for stock option and RSUs		(555	)	(0.2	)		(3,146	)	(1.0	)		-		-
Non-taxable bargain purchase gain		(71	)	-			(1,970	)	(0.7	)		-		-
Low income housing and other tax credits		(34,517	)	(10.2	)		(20,656	)	(6.9	)		(37,901	)	(15.6	)
Non-deductible stock options expense		-		-			-		-			3,469		1.4
Other, net		281		0.1			(351	)	(0.1	)		(487	)	(0.2	)
Total income tax expense	$	65,802		19.5	%	$	122,265		41.0	%	$	67,101		27.7	%