TWO Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes Income Taxes (Tables)

Income Taxes Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of Components of Income Tax Expense (Benefit)

The following table summarizes the tax (benefit) provision from continuing operations recorded at the taxable subsidiary level for the years ended December 31, 2017, 2016 and 2015:



	Year Ended
	December 31,
(in thousands)	2017			2016			2015
Current tax provision (benefit):
Federal	$	492		$	(1,616	)	$	(4,097	)
State	57			164			175
Total current tax provision (benefit)	549			(1,452		)	(3,922		)
Deferred tax (benefit) provision	(11,031		)	13,766			(12,638		)
Total (benefit from) provision for income taxes	$	(10,482	)	$	12,314		$	(16,560	)

Schedule of Effective Income Tax Rate Reconciliation

The following is a reconciliation of the statutory federal and state rates to the effective rates, for the years ended December 31, 2017, 2016 and 2015:



	Year Ended
	December 31,
	2017					2016					2015
(dollars in thousands)	Amount			Percent		Amount			Percent		Amount			Percent
Computed income tax expense at federal rate	$	104,215		35	%	$	127,957		35	%	$	166,432		35	%
State taxes, net of federal benefit, if applicable	37			—	%	106			—	%	114			—	%
Permanent differences in taxable income from GAAP net income ⁽¹⁾	1,208			—	%	401			—	%	4,203			1	%
Dividends paid deduction	(115,942		)	(39	)%	(116,150		)	(32	)%	(187,309		)	(39	)%
(Benefit from) provision for income taxes/ Effective Tax Rate⁽²⁾	$	(10,482	)	(4	)%	$	12,314		3	%	$	(16,560	)	(3	)%

____________________


(1)	For the year ended December 31, 2017, permanent differences include a provision of $17.5 million related to the effect of the federal tax reform statutory rate change from 35% to 21%.


(2)	The provision for (benefit from) income taxes is recorded at the taxable subsidiary level.

Schedule of Current and Deferred Tax Assets and Liabilities

The Company’s consolidated balance sheets, as of December 31, 2017 and December 31, 2016 contain the following current and deferred tax liabilities and assets, which are included in other assets, and are recorded at the taxable subsidiary level:



(in thousands)	December 31, 2017			December 31, 2016
Income taxes receivable
Federal income taxes receivable	$	130		$	1,527
State and local income taxes receivable	—			—
Income taxes receivable, net	130			1,527
Deferred tax assets (liabilities)
Deferred tax asset	50,419			111,636
Deferred tax liability	(24,463		)	(54,275		)
Total net deferred tax assets	25,956			57,361
Total tax assets, net	$	26,086		$	58,888

Schedule of Deferred Tax Assets and Liabilities

Components of the Company’s deferred tax assets as of December 31, 2017 and December 31, 2016 were as follows:



(in thousands)	December 31, 2017			December 31, 2016
Available-for-sale securities	$	(11,917	)	$	17,942
Mortgage servicing rights	(9,054		)	(9,492		)
Derivative assets and liabilities	4,870			(42,666		)
Other assets	139			24
Other liabilities	545			2,713
Intangibles	108			235
Alternative minimum tax credit	2,386			1,904
Net operating loss carryforward	21,853			42,039
Capital loss carryforward	19,766			44,662
Total deferred tax assets	28,696			57,361
Valuation allowance	(2,740		)	—
Total net deferred tax assets	$	25,956		$	57,361