Hanmi Financial Corporation Annual report pursuant to Section 13 and 15(d)

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


	Year Ended December 31,
	2013		2012			2011
	(In thousands)
Unrecognized tax benefits at beginning of year	$	1,254	$	1,281		$	940
Gross increases for tax positions of prior years		—		14			515
Lapse of statute of limitations		—		(41	)		(174	)

Unrecognized tax benefits at end of year	$	1,254	$	1,254		$	1,281

A summary of the provision (benefit) for income taxes was as follows:


	Year Ended December 31,
	2013		2012			2011
	(In thousands)
Current expense:
Federal	$	12,028	$	4,993		$	704
State		407		(19	)		29

Total current expense		12,435		4,974			733

Deferred expense:
Federal		8,235		(25,836	)		—
State		1,415		(26,506	)		—

Total deferred expense		9,650		(52,342	)		—

Provision (benefit) for income taxes	$	22,085	$	(47,368	)	$	733

Deferred tax assets and liabilities were as follows:


	Year Ended December 31,
	2013			2012			2011
	(In thousands)
Deferred tax assets:
Credit loss provision	$	27,607		$	29,995		$	42,712
Depreciation		1,180			1,253			1,240
Net operating loss carryforward		31,140			33,875			50,255
Unrealized loss on securities available for sale, interest-only strips		7,641			—			—
Tax credit		5,661			5,426			5,803
State taxes		—			—			91
Other		2,831			3,766			3,517

Total deferred tax assets		76,060			74,315			103,618

Deferred tax liabilities:
Mark to market		(10,112	)		(5,562	)		(14,820	)
Purchase accounting		(3,083	)		(3,217	)		(3,119	)
Unrealized gain on securities available for sale, interest-only strips		—			(3,096	)		(1,752	)
State taxes		(8,848	)		(9,429	)		—
Other		(2,250	)		(2,013	)		(1,658	)

Total deferred tax liabilities		(24,293	)		(23,317	)		(21,349	)

Valuation allowance		—			—			(82,269	)

Net deferred tax assets	$	51,767		$	50,998		$	—

Reconciliation between the federal statutory income tax rate and the effective tax rate is shown in the following table:


	Year Ended December 31,
	2013			2012			2011
Federal statutory income tax rate		35.00	%		35.00	%		35.00	%
State taxes, net of federal tax benefits		4.37	%		0.03	%		0.00	%
Tax-exempt municipal securities		-0.16	%		-0.32	%		-0.26	%
Tax credit—federal		-1.41	%		-2.10	%		-2.97	%
Other		-2.17	%		-2.16	%		-0.80	%
Valuation allowance		0.00	%		140.59	%		28.50	%

Effective tax rate		35.63	%		110.14	%		2.47	%