CFNL » Topics » Income Taxes

This excerpt taken from the CFNL 10-Q filed May 11, 2009.

Income Taxes

 

For the three months ended March 31, 2009, we recorded a provision for income taxes of $953,000, compared to $761,000 for the same period of 2008.  Our effective tax rate for the three months ended March 31, 2009 and 2008 was 30.5% and 27.2%, respectively.  The increase in our effective tax rate is primarily a result of a decrease in income from our tax-exempt investments during the first quarter of 2009 as compared to the same period of 2008.  In addition, our tax exempt income is a smaller percentage of our overall net income for the three months ended March 31, 2009 compared to March 31, 2008.  See also “Critical Accounting Policies — Valuation of Deferred Tax Assets.”

 

These excerpts taken from the CFNL 10-K filed Mar 16, 2009.

Income Taxes

        We recorded an income tax benefit of $912,000 for the year ended December 31, 2008, compared to a provision for income tax expense of $885,000 for the year ended December 31, 2007. The income tax benefit recorded during 2008 was primarily the result of the other-than-temporary impairment of our investment in Fannie Mae perpetual preferred stock and the result of our tax-exempt income from investments being a larger portion of our overall net income. On October 3, 2008, the Emergency Economic Stabilization Act was enacted which included a provision permitting banks to recognize the

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other-than-temporary impairment charge related to Fannie Mae perpetual preferred stock as an ordinary loss rather than a capital loss which allowed us to record an additional benefit for this loss. Our effective tax rate for the year ended December 31, 2007 was 16.5%.

        We recorded a provision for income tax expense of $885,000 for the year ended December 31, 2007, a decrease of $2.3 million compared to 2006. Our effective tax rate for the years ended December 31, 2007 and 2006 was 16.5% and 30.0%, respectively. The decrease in our effective tax rate from 2006 to 2007 is primarily the result of our tax-exempt income from investments being a larger portion of our overall net income for the year ended December 31, 2007 compared to 2006.

        For more information, see "Critical Accounting Policies" above. In addition, Note 9 to the notes to consolidated financial statements provides additional information with respect to the deferred tax accounts and the net operating loss carryforward.

Income Taxes



        We recorded an income tax benefit of $912,000 for the year ended December 31, 2008, compared to a provision for income tax
expense of $885,000 for the year ended December 31, 2007. The income tax benefit recorded during 2008 was primarily the result of the other-than-temporary impairment of
our investment in Fannie Mae perpetual preferred stock and the result of our tax-exempt income from investments being a larger portion of our overall net income. On October 3, 2008,
the Emergency Economic Stabilization Act was enacted which included a provision permitting banks to recognize the



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other-than-temporary
impairment charge related to Fannie Mae perpetual preferred stock as an ordinary loss rather than a capital loss which allowed us to record an additional
benefit for this loss. Our effective tax rate for the year ended December 31, 2007 was 16.5%.



        We
recorded a provision for income tax expense of $885,000 for the year ended December 31, 2007, a decrease of $2.3 million compared to 2006. Our effective tax rate for the
years ended December 31, 2007 and 2006 was 16.5% and 30.0%, respectively. The decrease in our effective tax rate from 2006 to 2007 is primarily the result of our tax-exempt income
from investments being a larger portion of our overall net income for the year ended December 31, 2007 compared to 2006.



        For
more information, see "Critical Accounting Policies" above. In addition, Note 9 to the notes to consolidated financial statements provides additional information with respect
to the deferred tax accounts and the net operating loss carryforward.




(n)   Income Taxes

        Deferred tax assets and liabilities are recognized for the tax effects of differing carrying values of assets and liabilities for tax and financial statement purposes that will reverse in future periods. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

        When uncertainty exists concerning the recoverability of a deferred tax asset, the carrying value of the asset may be reduced by a valuation allowance. The amount of any valuation allowance established is based upon an estimate of the deferred tax asset that is more likely than not to be recovered. Increases or decreases in the valuation allowance result in increases or decreases to the provision for income taxes.

        The Company adopted the provisions of FASB Interpretation No. 48 ("FIN No. 48"), Accounting for Uncertainty in Income Taxes, on January 1, 2007. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity's financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN No. 48 prescribes a recognition threshold and measurement principles for financial statement disclosure of tax positions taken or expected to be taken on a tax return. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As of December 31, 2008 and 2007, the

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CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)


Company had no unrecognized tax benefits. The Company also had no interest expense and/or tax penalties during the year ended December 31, 2008. If the Company had such expenses, they would be classified in the consolidated statements of income as part of the provision for income tax expense.

(n)   Income Taxes





        Deferred tax assets and liabilities are recognized for the tax effects of differing carrying values of assets and liabilities for tax and financial statement
purposes that will reverse in future periods. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or
liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.



        When
uncertainty exists concerning the recoverability of a deferred tax asset, the carrying value of the asset may be reduced by a valuation allowance. The amount of any valuation
allowance established is based upon an estimate of the deferred tax asset that is more likely than not to be recovered. Increases or decreases in the valuation allowance result in increases or
decreases to the provision for income taxes.



        The
Company adopted the provisions of FASB Interpretation No. 48 ("FIN No. 48"),
Accounting for Uncertainty in Income Taxes,
on January 1, 2007. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity's financial statements in accordance with SFAS No. 109,
Accounting for Income
Taxes
. FIN No. 48 prescribes a recognition threshold and measurement principles for financial statement disclosure of tax
positions taken or expected to be taken on a tax return. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure
and transition. As of December 31, 2008 and 2007, the



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CARDINAL FINANCIAL CORPORATION AND SUBSIDIARIES



Notes to Consolidated Financial Statements (Continued)



(2) Summary of Significant Accounting Policies (Continued)






Company
had no unrecognized tax benefits. The Company also had no interest expense and/or tax penalties during the year ended December 31, 2008. If the Company had such expenses, they would be
classified in the consolidated statements of income as part of the provision for income tax expense.





This excerpt taken from the CFNL 10-Q filed Nov 7, 2008.

Income Taxes

 

For the three months ended September 30, 2008, we recorded an income tax benefit of $816,000, compared to a tax benefit of $702,000 for the same period of 2007.  For the year to date September 30, 2008 and 2007, provision for income tax expense was $84,000 and $851,000, respectively.  Our income tax provision for the three and nine months ended September 30, 2008 were impacted by the capital loss treatment of our other-than-temporary impairment of our investment in Fannie Mae perpetual preferred stock.  Subsequent to the end of the third quarter of 2008, the Emergency Economic Stabilization Act was enacted, which includes a provision permitting banks to recognize the other-than-temporary impairment in Fannie Mae perpetual preferred stock as an ordinary loss, which will increase the tax benefit available to us.  During the fourth quarter of 2008, we will record an additional tax benefit of $1.1 million relating to this impairment.   See also “Critical Accounting Policies — Valuation of Deferred Tax Assets.”

 

This excerpt taken from the CFNL 10-Q filed Aug 8, 2008.

Income Taxes

 

For the three months ended June 30, 2008, we recorded a provision for income tax expense of $138,000, compared to $816,000 for the same period of 2007.  For the year to date June 30, 2008 and 2007, provision for income tax expense was $900,000 and $1.6 million, respectively.  Our effective tax rate for the three months ended June 30, 2008 and 2007 was 13.6% and 29.6%, respectively.  The decrease in our effective tax rate for the three months ended June 30, 2008 compared to the second quarter of 2007 was due to the tax benefit recorded for the one-time cash settlement of $1.8 million which was recorded at our statutory rate of 34.5%.  For the year to date June 30, 2008 and 2007, our effective tax rates were 23.6% and 29.5%, respectively.  The decrease in our effective tax rate over the year is primarily a result of our increase in tax-exempt investments and our tax-exempt income being a larger percentage of our overall net income for the six months ended June 30, 2008 compared to June 30, 2007.  See also “Critical Accounting Policies — Valuation of Deferred Tax Assets.”

 

This excerpt taken from the CFNL 10-Q filed May 12, 2008.

Income Taxes

 

For the three months ended March 31, 2008, we recorded a provision for income tax expense of $761,000, compared to $737,000 for the same period of 2007.  Our effective tax rate for the three months ended March 31, 2008 and 2007 was 27.2% and 29.5%, respectively.  The decrease in our effective tax rate is primarily a result of our increase in tax-exempt investments over the past twelve months and our tax-exempt income being a larger percentage of our overall

 

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net income for the three months ended March 31, 2008 compared to March 31, 2007.  See also “Critical Accounting Policies — Valuation of Deferred Tax Assets.”

 

These excerpts taken from the CFNL 10-K filed Mar 17, 2008.

Income Taxes

        We recorded a provision for income tax expense of $885,000 for the year ended December 31, 2007, a decrease of $2.3 million compared to 2006. Our effective tax rate for the years ended December 31, 2007 and 2006 was 16.5% and 30.0%, respectively. The decrease in our effective tax rate from 2006 to 2007 is primarily the result of our tax-exempt income from investments being a larger portion of our overall net income for the year ended December 31, 2007 compared to 2006.

        We recorded a provision for income tax expense of $5.2 million for the year ended December 31, 2005. Our effective tax rate for the year ended December 31, 2005 was 34.4%. The decrease in effective tax rates from 2005 to 2006 is primarily the result of our adding tax-exempt investments to our balance sheet during 2006.

        For more information, see "Critical Accounting Policies" above. In addition, note 10 to the notes to consolidated financial statements provides additional information with respect to the deferred tax accounts and the net operating loss carryforward.

50


Income Taxes



        We recorded a provision for income tax expense of $885,000 for the year ended December 31, 2007, a decrease of $2.3 million compared to 2006. Our
effective tax rate for the years ended December 31, 2007 and 2006 was 16.5% and 30.0%, respectively. The decrease in our effective tax rate from 2006 to 2007 is primarily the result of our
tax-exempt income from investments being a larger portion of our overall net income for the year ended December 31, 2007 compared to 2006.




        We
recorded a provision for income tax expense of $5.2 million for the year ended December 31, 2005. Our effective tax rate for the year ended December 31, 2005 was
34.4%. The decrease in effective tax rates from 2005 to 2006 is primarily the result of our adding tax-exempt investments to our balance sheet during 2006.



        For
more information, see "Critical Accounting Policies" above. In addition, note 10 to the notes to consolidated financial statements provides additional information with respect
to the deferred tax accounts and the net operating loss carryforward.



50









This excerpt taken from the CFNL 10-Q filed Nov 8, 2007.

Income Taxes

 

For the three months ended September 30, 2007, we recorded an income tax benefit of $702,000, compared to an income tax benefit of $148,000 for the same period of 2006.  The benefits recorded during these reporting periods primarily resulted from the escrow arrangement loss recorded in the third quarter of 2007 and the impairment charges recorded during the third

 

 

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quarter of 2006, each recorded with a tax benefit calculated at our statutory rate of 34.5% and 35% for the three months ended September 30, 2007 and 2006, respectively.  Our effective tax rate decreased in the third quarter of 2007 as compared to the same period of 2006 primarily as a result of our increase in tax-exempt investments over the past twelve months.

 

Provision for income tax expense for the nine months ended September 30, 2007 and 2006 was $851,000 and $2.2 million, respectively, a decrease of $1.4 million, or 61%.  For the nine months ended September 30, 2007 and 2006, our effective tax rate was 21.5% and 29.9%, respectively.  Each of these effective tax rates was impacted by the aforementioned tax benefits recorded at the applicable statutory rates in conjunction with the nonrecurring expenses reported in 2007 and 2006.  In addition, the effective tax rate decreased from 2006 to 2007 as a result of our adding tax-exempt investments during the second half of 2006 and continuing into 2007.  See also “Critical Accounting Policies — Valuation of Deferred Tax Assets.”

 

This excerpt taken from the CFNL 10-Q filed Aug 9, 2007.

Income Taxes

For the three months ended June 30, 2007, we recorded a provision for income tax expense of $816,000, compared to income tax expense of $1.0 million for the same period of 2006.  Provision for income tax expense for the six months ended June 30, 2007 and 2006 was $1.6 million and $2.4 million, respectively, a decrease of $805,000, or 34%.  Our effective tax rate for the three months ended June 30, 2007 and 2006 was 29.6% and 30.7%, respectively.  For the six months ended June 30, 2007 and 2006, our effective tax rate was 29.5% and 32.3%, respectively.  The decreases in our effective tax rates from 2006 to 2007 are primarily the result of our adding tax-exempt investments during the second half of 2006 and continuing into 2007.  See also “Critical Accounting Policies — Valuation of Deferred Tax Assets.”

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This excerpt taken from the CFNL 10-Q filed May 9, 2007.

Income Taxes

For the three months ended March 31, 2007, we recorded a provision for income tax expense of $737,000, compared to income tax expense of $1.3 million for the same period of 2006.  Our effective tax rate for the three months ended March 31, 2007 and 2006 was 29.5% and 33.8%, respectively.  The decrease in the effective tax rate from 2006 to 2007 is primarily the result of our adding tax-exempt investments during the second half of 2006 and continuing into 2007.  See also “Critical Accounting Policies — Valuation of Deferred Tax Assets.”

This excerpt taken from the CFNL 10-K filed Mar 15, 2007.

(n) Income Taxes

Deferred tax assets and liabilities are recognized for the tax effects of differing carrying values of assets and liabilities for tax and financial statement purposes that will reverse in future periods. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

When uncertainty exists concerning the recoverability of a deferred tax asset, the carrying value of the asset may be reduced by a valuation allowance. The amount of any valuation allowance established is based upon an estimate of the deferred tax asset that is more likely than not to be recovered.  Increases or decreases in the valuation allowance result in increases or decreases to the provision for income taxes.

This excerpt taken from the CFNL 10-Q filed Nov 8, 2006.

Income Taxes

For the three months ended September 30, 2006, we recorded an income tax benefit of $132,000, compared to income tax expense of $1.6 million for the same period of 2005.  For the nine months ended September 30, 2006 and 2005, we recorded provisions for income taxes of $2.3 million and $3.5 million, respectively.  During the third quarter of 2006, we retroactively updated our effective tax rate for the effects of tax-exempt investments the Bank has purchased during the year.  See also “Critical Accounting Policies — Valuation of Deferred Tax Assets.”

This excerpt taken from the CFNL 10-K filed Mar 6, 2006.

(m) Income Taxes

Deferred tax assets and liabilities are recognized for the tax effects of differing carrying values of assets and liabilities for tax and financial statement purposes that will reverse in future periods. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

When uncertainty exists concerning the recoverability of a deferred tax asset, the carrying value of the asset is reduced by a valuation allowance. The amount of any valuation allowance established is based upon an estimate of the deferred tax asset that is more likely than not to be recovered. Increases or decreases in the valuation allowance result in increases or decreases to the provision for income taxes.

This excerpt taken from the CFNL 10-K filed Mar 15, 2005.
Income Taxes

We recorded a provision for income tax expense of $1.7 million for the year ended December 31, 2004. Our effective tax rate for the year ended December 31, 2004 was 33.0%

We recorded an income tax benefit of $3.5 million in the fourth quarter of 2003 primarily attributable to the recognition of deferred tax assets related to the net operating loss carryforwards. The benefit of our deferred tax asset was recognized based on a detailed assessment indicating that it is more likely than not that the benefit of these net operating losses and other deferred tax assets would be realized. Factors that were considered in our decision to record our income tax benefit were 2003 profitability, future projections of continued profitability and the completion of our common stock offering in December 2003. For more information, see “Critical Accounting Policies” earlier in this discussion. In addition, Note 12 to the Notes to Consolidated Financial Statements provides additional information with respect to the deferred tax accounts and the net operating loss carryforward.

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