XML 34 R18.htm IDEA: XBRL DOCUMENT v3.25.0.1
Income Taxes
 12 Months Ended
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)202420232022
Current:
Federal$171,913 $219,548 $170,779 
State and local58,204 50,750 52,579 
Total current230,117 270,298 223,358 
Deferred:
Federal(14,464)(43,615)(45,421)
State and local32,647 (10,019)(24,243)
Total deferred18,183 (53,634)(69,664)
Total federal157,449 175,933 125,358 
Total state and local90,851 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,
 202420232022
(In thousands)AmountPercentAmountPercentAmountPercent
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 federal42,059 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 premiums12,305 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 expense3,680 0.4 4,167 0.4 7,948 1.0 
DTA valuation allowance adjustment, net31,091 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)20242023
Deferred tax assets:
ACL on loans and leases$187,348 $171,870 
Net operating loss and credit carry forwards74,363 68,103 
Compensation and employee benefit plans50,880 46,670 
Lease liabilities under operating leases52,397 60,331 
Net unrealized loss on available-for-sale securities193,309 191,922 
Other71,008 72,546 
Gross deferred tax assets629,305 611,442 
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 leases54,990 54,300 
Goodwill and other intangible assets102,042 59,817 
Purchase accounting and fair value adjustments10,359 15,527 
Other36,202 34,086 
Gross deferred tax liabilities248,027 213,484 
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)202420232022
Beginning balance$13,836 $9,875 $4,249 
Additions as a result of tax positions taken during the current year493 359 223 
Additions as a result of tax positions taken during prior years7,447 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.