10.

Income Taxes

Flushing Financial Corporation files consolidated Federal and combined New York State and New York City income tax returns with its subsidiaries, with the exception of the trusts, which file separate Federal income tax returns as trusts, and FPFC, which files a separate Federal income tax return as a real estate investment trust. Additionally, the Bank files New Jersey State tax returns. The Company remains subject to examination for its Federal, New York State and New Jersey income tax returns for the years ending on or after

December 31, 2014.

The Company is undergoing examinations of its Federal income tax return for

2015

and its New York City income tax returns for

2011,

2012

and

2013.

The Company believes it has accrued for all potential amounts that

may

be due to all taxing authorities.

Income tax provisions are summarized as follows for the years ended

December 31:

	2017		2016			2015
	(In thousands)
Federal:
Current	$	14,859	$	34,996		$	25,319
Deferred		7,985		(1,416	)		(3,476	)
Total federal tax provision		22,844		33,580			21,843
State and Local:
Current		1,419		7,647			7,059
Deferred		750		(124	)		(1,735	)
Total state and local tax provision		2,169		7,523			5,324
Total income tax provision	$	25,013	$	41,103		$	27,167

December 22, 2017,

the Tax Cuts and Jobs Act (the “TCJA”) was enacted, which among other things, reduced the federal income tax rate for corporations from

35%

21%

effective

January 1, 2018.

We recorded

$3.8

million in additional tax expense during

2017

from the revaluation of our net deferred tax assets, resulting from the TCJA. The Company has recorded a deferred tax asset of

$24.4

million, which reflects the tax impact from the TCJA. Additionally, on

December 22, 2017,

Staff Accounting Bulletin

No.

118

(“SAB

118”

) was released by the Securities and Exchange Commission (“SEC”) to address any concerns related to the accounting for income tax effects as a result of the TCJA in situations where a registrant

may

not

have the necessary information available, prepared, or analyzed in reasonable detail to complete the required accounting in the reporting period including the enactment date. SAB

118

allows for a measurement period

not

to extend beyond

one

year from the TCJA enactment date to complete the necessary accounting.

The income tax provision in the Consolidated Statements of Income has been provided at effective rates of

37.8%,

38.8%

and

37.0%

for the years ended

December 31, 2017,

2016

and

2015,

respectively. The effective rates differ from the statutory federal income tax rate as follows for the years ended

December 31:

	2017					2016					2015
	(Dollars in thousands)
Taxes at federal statutory rate	$	23,147		35.0	%	$	37,106		35.0	%	$	25,681		35.0	%
Increase (reduction) in taxes resulting from:
State and local income tax, net of Federal income tax benefit		1,410		2.1			4,890		4.6			3,461		4.7
TCJA		3,770		5.7			-		-			-		-
Other		(3,314	)	(5.0	)		(893	)	(0.8	)		(1,975	)	(2.7	)
Taxes at effective rate	$	25,013		37.8	%	$	41,103		38.8	%	$	27,167		37.0	%

The components of the net deferred tax assets are as follows at

December 31:

	2017		2016
	(In thousands)
Deferred tax assets:
Postretirement benefits	$	6,047	$	7,800
Allowance for loan losses		6,414		9,518
Stock based compensation		2,808		3,525
Depreciation		1,057		2,135
Unrealized loss on securities available for sale		3,150		2,770
Fair value adjustment on financial assets carried at fair value		168		-
Fair value hedges		939		1,027
Adjustment required to recognize funded status of postretirement pension plans		2,068		3,246
Gain on sale of buildings		1,434		2,211
Other		299		2,434
Deferred tax assets		24,384		34,666

Deferred tax liabilities:
FPFC deferred income		1,916		-
Cashflow hedges		129		-
Fair value adjustment on financial assets carried at fair value		-		150
Fair value adjustment on financial liabilities carried at fair value		7,800		11,943
Other		4,239		4,684
Deferred tax liabilities		14,084		16,777

Net deferred tax asset included in other assets	$	10,300	$	17,889

The Company has recorded a deferred tax asset of

$24.4

million. This represents the anticipated net federal, state and local tax benefits expected to be realized in future years upon the utilization of the underlying tax attributes comprising this balance. The Company has reported taxable income for federal, state, and local tax purposes in each of the past

three

years. In management’s opinion, in view of the Company’s previous, current and projected future earnings trend, the probability that some of the Company’s

$14.1

million deferred tax liability can be used to offset a portion of the deferred tax asset, as well as certain tax planning strategies, it is more likely than

not

that the deferred tax asset will be fully realized. Accordingly,

valuation allowance was deemed necessary for the deferred tax asset at

December 31, 2017

and

2016.

The Company does

not

have uncertain tax positions that are deemed material. The Company’s policy is to recognize interest and penalties on income taxes in operating expenses. During the

three

years ended

December 31, 2017,

the Company did

not

recognize any material amounts of interest or penalties on income taxes.