Note 7 — Income Taxes

The Company’s income tax expenses for the continuing operations were $5.0 million for the three months ended September 30, 2014, compared to $6.6 million for the same period in 2013. The effective income tax rate was 27.25 percent for the three months ended September 30, 2014, compared to 38.95 percent for the same period in 2013. For the nine months ended September 30, 2014, income tax expense for the continuing operations were $19.7 million, compared to $17.5 million for the same period in 2013. The effective income tax rate was 35.48 percent, compared to 41.42 percent for the same period in 2013. The decrease in the effective tax rate for the three months ended September 30, 2014 was due mainly to tax rate reduction to the adjustment for the nontaxable bargain purchase gain, which is excluded from taxable income. The decrease in the effective tax rate for the nine months ended September 30, 2014, as compared to the same period in 2013, was due mainly to tax rate reduction to the adjustment for the bargain purchase gain, a $400,000 deferred tax benefit generated from the sale of the insurance businesses and tax benefits to be realized from investments in low income tax credit funds, offset by the expiration of the California EZ net interest deduction and EZ hiring credits. Management concluded that no valuation allowance is required for the deferred tax assets except for the portion related to certain state net operating losses as of September 30, 2014.

As of September 30, 2014, the Company was subject to examinations by various federal and state tax authorities for the tax years ended December 31, 2004 through 2013. As of September 30, 2014, the Company was subjected to audits or examinations by the Internal Revenue Service for the 2009 tax year and the 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 results of the audits.