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

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

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



	Year Ended December 31,
	2016		2015			2014
	(In thousands)
Unrecognized tax benefits at beginning of year	$	934	$	1,765		$	1,254
Gross increases for tax positions of prior years	105		—			676
Gross decreases for tax positions of prior years	—		—			(165		)
Lapse of statute of limitations	—		(831		)	—
Unrecognized tax benefits at end of year	$	1,039	$	934		$	1,765

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

Deferred tax assets and liabilities were as follows:



	Year Ended December 31,
	2016			2015			2014
	(In thousands)
Deferred tax assets:
Loan and lease loss provision	$	13,932		$	18,205		$	22,676
Depreciation	—			—			3,491
Purchase accounting	7,492			13,156			13,731
Net operating loss carryforward	16,876			21,511			24,435
Unrealized loss on securities available for sale	1,695			859			287
Indemnified assets	1,441			152			—
Tax credit	3,516			3,939			5,853
State taxes	2,231			1,539			1,951
Other	5,726			5,040			9,234
Total deferred tax assets	52,909			64,401			81,658
Deferred tax liabilities:
Mark to market	(3,960		)	(10,469		)	(6,462		)
Depreciation	(396		)	(705		)	—
Purchase accounting	—			—			—
Indemnified assets	—			—			(2,995		)
Other	(1,190		)	(1,132		)	(2,051		)
Total deferred tax liabilities	(5,546		)	(12,306		)	(11,508		)
Valuation Allowance	(1,031		)	—			—
Net deferred tax assets	$	46,332		$	52,095		$	70,150

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



	Year Ended December 31,
	2016		2015		2014
Federal statutory income tax rate	35.00	%	35.00	%	35.00	%
State taxes, net of federal tax benefits	7.04	%	8.32	%	5.86	%
Tax-exempt municipal securities	(0.26	)%	(0.26	)%	(0.07	)%
Tax credit - federal	(2.50	)%	(2.51	)%	(2.27	)%
Bargain purchase gain	—	%	—	%	(7.03	)%
Other	(2.48	)%	0.95	%	(0.01	)%
Effective tax rate	36.80	%	41.50	%	31.48	%