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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income tax expense reflects the following expense (benefit) components:
| Years ended December 31,
(In thousands) | 2024 |  | 2023 |  | 2022
Current: |  |  |  |  |
Federal | $ | 171,913 |  |  | $ | 219,548 |  |  | $ | 170,779 |
State and local | 58,204 |  |  | 50,750 |  |  | 52,579 |
Total current | 230,117 |  |  | 270,298 |  |  | 223,358 |
Deferred: |  |  |  |  |
Federal | (14,464) |  |  | (43,615) |  |  | (45,421) |
State and local | 32,647 |  |  | (10,019) |  |  | (24,243) |
Total deferred | 18,183 |  |  | (53,634) |  |  | (69,664) |
Total federal | 157,449 |  |  | 175,933 |  |  | 125,358 |
Total state and local | 90,851 |  |  | 40,731 |  |  | 28,336 |
Income tax expense | $ | 248,300 |  |  | $ | 216,664 |  |  | $ | 153,694 |
Included in the Company’s income tax expense for the years ended December 31, 2024, 2023, and 2022, are net tax benefits related to credits of approximately $19.1 million, $11.9 million, and $14.0 million, respectively. These amounts relate primarily to LIHTC investments and include associated SALT credits and benefits from losses, as well as the related proportional amortization expense of the underlying investments. The Company’s deferred income tax expense for the year ended December 31, 2024, includes $29.4 million of net tax expense related to an increase in its beginning-of-year valuation allowance for its SALT DTAs attributable to operating loss carryforwards, as discussed further below. The Company’s deferred income tax benefit for the year ended December 31, 2022, includes a net tax benefit of $9.9 million related to a reduction in its beginning-of-year valuation allowance that year for its SALT DTAs attributable to operating loss carryforwards. The following table reflects a reconciliation of reported income tax expense to the amount that would result from applying the federal statutory rate of 21.0%:
| Years ended December 31,
| 2024 |  | 2023 |  | 2022
(In thousands) | Amount | Percent |  | Amount | Percent |  | Amount | Percent
Income tax expense at federal statutory rate | $ | 213,572 |  | 21.0 | % |  | $ | 227,746 |  | 21.0 | % |  | $ | 167,575 |  | 21.0 | %
Reconciliation to reported income tax expense: |  |  |  |  |  |  |  |
SALT expense, net of federal | 42,059 |  | 4.1 |  |  | 32,177 |  | 3.0 |  |  | 32,259 |  | 4.1 |
Tax-exempt interest, net | (29,272) |  | (2.9) |  |  | (44,473) |  | (4.1) |  |  | (35,371) |  | (4.4) |
Increase in cash surrender value of life insurance | (5,816) |  | (0.6) |  |  | (5,469) |  | (0.5) |  |  | (6,122) |  | (0.8) |
Non-deductible FDIC deposit insurance premiums | 12,305 |  | 1.2 |  |  | 10,693 |  | 1.0 |  |  | 5,581 |  | 0.7 |
LIHTC and related benefits, net | (13,545) |  | (1.3) |  |  | (3,866) |  | (0.4) |  |  | (7,627) |  | (1.0) |
Non-deductible compensation expense | 3,680 |  | 0.4 |  |  | 4,167 |  | 0.4 |  |  | 7,948 |  | 1.0 |
DTA valuation allowance adjustment, net | 31,091 |  | 3.1 |  |  | (368) |  | — |  |  | (9,874) |  | (1.2) |
Other, net | (5,774) |  | (0.6) |  |  | (3,943) |  | (0.4) |  |  | (675) |  | (0.1) |
Income tax expense and effective tax rate | $ | 248,300 |  | 24.4 | % |  | $ | 216,664 |  | 20.0 | % |  | $ | 153,694 |  | 19.3 | %
The following table reflects the significant components of DTAs, net:
| At December 31,
(In thousands) | 2024 |  | 2023
Deferred tax assets: |  |  |
ACL on loans and leases | $ | 187,348 |  |  | $ | 171,870 |
Net operating loss and credit carry forwards | 74,363 |  |  | 68,103 |
Compensation and employee benefit plans | 50,880 |  |  | 46,670 |
Lease liabilities under operating leases | 52,397 |  |  | 60,331 |
Net unrealized loss on available-for-sale securities | 193,309 |  |  | 191,922 |
Other | 71,008 |  |  | 72,546 |
Gross deferred tax assets | 629,305 |  |  | 611,442 |
Valuation allowance | (64,422) |  |  | (28,746) |
Total deferred tax assets, net of valuation allowance | $ | 564,883 |  |  | $ | 582,696 |
Deferred tax liabilities: |  |  |
ROU assets under operating leases | $ | 44,434 |  |  | $ | 49,754 |
Equipment financing leases | 54,990 |  |  | 54,300 |
Goodwill and other intangible assets | 102,042 |  |  | 59,817 |
Purchase accounting and fair value adjustments | 10,359 |  |  | 15,527 |
Other | 36,202 |  |  | 34,086 |
Gross deferred tax liabilities | 248,027 |  |  | 213,484 |
Deferred tax assets, net | $ | 316,856 |  |  | $ | 369,212 |
The Company’s net DTAs decreased by $52.4 million during 2024, reflecting primarily a $35.9 million net DTL recognized as part of purchase accounting adjustments related to the acquisition of Ametros and the $18.2 million deferred tax expense, partially offset by a $2.5 million benefit allocated directly to AOCL. The valuation allowance of $64.4 million at December 31, 2024, is comprised of $62.7 million attributable to SALT net operating loss and credit carryforwards and $1.7 million of capital loss carryforwards, as compared to $28.7 million at December 31, 2023, primarily attributable to SALT net operating loss carryforwards. The $35.7 million increase in the valuation allowance during 2024 primarily reflects a $29.4 million increase in the beginning-of-year valuation allowance related to a change in management's estimate about the realizability of the Company’s SALT net operating losses, $3.1 million related to the Ametros acquisition, and $1.7 million attributable to capital losses, with the remainder related to current year activity and return true-ups that were largely offset by increases to related DTAs. SALT net operating loss carryforwards of approximately $1.1 billion, including those related to the Bend and Ametros acquisitions, and SALT credit carryforwards of $1.1 million at December 31, 2024, have varying carryforward periods. The vast majority of the SALT net operating loss and credit carryforwards are scheduled to expire during year years 2025 through 2032. Federal net operating loss carryforwards of approximately $21.5 million and federal credit carryforwards of $0.4 million at December 31, 2024, related to the Bend and Ametros acquisition are subject to annual limitations on utilization, with the net operating losses able to be carried forward indefinitely and the credits scheduled to expire in varying amounts between 2038 and 2042. The valuation allowance reflects approximately $1.1 billion of those SALT net operating loss carryforwards and $0.3 million of the SALT credit carryforwards that are estimated to expire unused. Management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize its total DTAs, net of the valuation allowance. Although taxable income in prior years is no longer able to be included as a source of taxable income, due to the general repeal of the carryback of net operating losses under the Tax Cuts and Jobs Act of 2017, significant positive evidence remains in support of management’s conclusion regarding the realizability of the Company’s DTAs, including projected future reversals of existing taxable temporary differences and book-taxable income levels in recent years and projected in future years. There can, however, be no assurance that any specific level of future income will be generated or that the Company’s DTAs will ultimately be realized. DTLs of $63.2 million at both December 31, 2024, and 2023, have not been recognized for certain thrift bad-debt reserves, established before 1988, that would become taxable upon the occurrence of certain events: distributions by the Bank in excess of certain earnings and profits; the redemption of the Bank’s stock; or liquidation. The Company does not expect any of those events to occur. At both December 31, 2024, and 2023, the cumulative taxable temporary differences applicable to those reserves approximated $233.1 million. The following table reflects a reconciliation of the beginning and ending balances of UTBs:
| Years ended December 31,
(In thousands) | 2024 |  | 2023 |  | 2022
Beginning balance | $ | 13,836 |  |  | $ | 9,875 |  |  | $ | 4,249 |
Additions as a result of tax positions taken during the current year | 493 |  |  | 359 |  |  | 223 |
Additions as a result of tax positions taken during prior years | 7,447 |  |  | 4,255 |  |  | 8,807 |
Reductions as a result of tax positions taken during prior years | (5,651) |  |  | — |  |  | (503) |
Reductions relating to settlements with taxing authorities | (1,997) |  |  | — |  |  | (2,110) |
Reductions as a result of lapse of statute of limitation periods | (362) |  |  | (653) |  |  | (791) |
Ending balance | $ | 13,766 |  |  | $ | 13,836 |  |  | $ | 9,875 |
At December 31, 2024, 2023, and 2022, there were $11.6 million, $12.4 million, and $9.1 million, respectively, of UTBs that if recognized would affect the effective tax rate. The Company recognizes interest and penalties related to UTBs, where applicable, in income tax expense. The Company recognized expense of $3.1 million, $1.8 million, and $0.1 million during the years ended December 31, 2024, 2023, and 2022, respectively. At December 31, 2024 and 2023, the Company had accrued interest and penalties related to UTBs of $6.9 million and $3.8 million respectively. The Company has determined it is reasonably possible that its total UTBs could decrease by between $0.9 million and $8.8 million by the end of 2025 as a result of potential lapses in statute-of-limitation periods and/or potential settlements with taxing authorities, primarily concerning various state and local apportionment and tax-base determinations. The Company’s federal tax returns for years subsequent to 2020 remain open to examination, except for the carryback of a Sterling 2019 net operating loss under the CARES Act in 2020 to tax years 2014 and 2016, which is currently under audit by the Internal Revenue Service. The Company's tax returns filed in its other principal tax jurisdictions of Connecticut, New York State, New York City, Massachusetts and New Jersey, primarily for years subsequent to 2016 are either under or remain open to examination.

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