Note 23 - Income Taxes

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

NOTE 23. INCOME TAXES

The following table presents components of income tax expense included in the Consolidated Statements of Operations for the years ended December 31 for each of the past three years.

(Dollars in thousands)	Current		Deferred			Total
Year ended December 31, 2014:
Federal	$	1,520	$	(414	)	$	1,106
State		391		83			474
	$	1,911	$	(331	)	$	1,580
Year ended December 31, 2013:
Federal	$	4,559	$	(809	)	$	3,750
State		1,422		(321	)		1,101
	$	5,981	$	(1,130	)	$	4,851
Year ended December 31, 2012:
Federal	$	4,933	$	(1,643	)	$	3,290
State		1,063		(500	)		563
Total	$	5,996	$	(2,143	)	$	3,853

The Company’s effective tax rate is derived from the sum of income tax expense divided by operating income. Income tax expense attributable to income before income taxes differed from the amounts computed by applying the U.S. federal income tax rate of 34% to income before income taxes.

The following table presents a reconciliation of income taxes computed at the federal statutory rate to the actual effective rate for the years ended December 31, 2014, 2013, and 2012:

	2014			2013			2012
Income tax at the federal statutory rate		34.00	%		34.00	%		34.00	%
Return to provision adjustment for 2012 taxable gain on sale of subsidiary		—	%		6.34	%		—	%
State franchise tax, net of federal tax benefit		4.89	%		5.89	%		3.74	%
Amortization of affordable housing credit investments		11.04	%		2.27	%		2.64	%
Officer life insurance		(3.34	)%		(1.47	)%		(1.30	)%
Affordable housing credits		(11.67	)%		(1.80	)%		(1.59	)%
Tax-exempt interest		(13.46	)%		(7.02	)%		(7.74	)%
Other		0.16	%		(0.27	)%		2.03	%
Effective Tax Rate		21.62	%		37.94	%		31.78	%

During 2014 the Company experienced a significant decline in the effective tax rate. During 2014, tax exempt interest derived from the Company's municipal securities portfolio represented a significant portion of the Company’s pre-tax income. Furthermore, the Company benefited from tax credits derived from investments in affordable housing projects. See Note 24 Qualified Affordable Housing Project Investments in these Notes to Consolidated Financial Statements for further details regarding the Company's investments in affordable housing projects.

The following table reflects the effects of temporary differences that give rise to the components of the net deferred tax asset as of December 31, 2014 and 2013.

(Dollars in thousands)	2014			2013
Deferred tax assets:
Loan and lease loss reserves	$	4,865		$	6,639
Deferred compensation		3,590			2,967
Unrealized losses other comprehensive income		1,327			1,939
Oreo accrued selling costs		1,179			861
State franchise taxes		184			319
General business credits		747			—
Other		1,004			571
Total deferred tax assets		12,896			13,296
Deferred tax liabilities:
Deferred state taxes		(856	)		(885	)
Deferred loan origination costs		(427	)		(444	)
Unrealized gains other comprehensive income		(1,256	)		(255	)
Basis difference in fixed assets		(70	)		(59	)
Other		(56	)		—
Total deferred tax liabilities		(2,665	)		(1,643	)
Net deferred tax asset	$	10,231		$	11,653

The Company has determined that it is not required to establish a valuation allowance for the deferred tax assets as management believes it is more likely than not that the deferred tax assets of $12.9 million and $13.3 million at December 31, 2014 and 2013, will be realized principally through future reversals of existing taxable temporary differences. Management further believes that future taxable income will be sufficient to realize the benefits of temporary deductible differences that cannot be realized through the reversal of future temporary taxable differences.

The Company received federal and state tax credits relating to investments in affordable housing projects. See Note 24 Qualified Affordable Housing Project Investments in these Notes to Consolidated Financial Statements, for further details on the Company’s affordable housing project investments.

Additionally, the Company has no unrecognized tax benefits at December 31, 2014 and 2013. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in tax expense.

The Company files income tax returns in the U.S. federal jurisdiction, and the State of California. With few exceptions, the Company is no longer subject to U.S. federal or state and local income tax examinations by tax authorities for the years before 2008.