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Federal, State, and Local Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Federal, State, and Local Taxes | Federal, State, and Local Taxes The following table summarizes the components of the Company’s net deferred tax asset (liability) at December 31, 2023 and 2022:
| December 31, |  |  |  |  |  |  |  |
(in millions) | 2023 |  | 2022 |  |  |  |  |  |  |  |
Deferred Tax Assets: |  |  |  |  |  |  |  |  |  |  |
Allowance for credit losses on loans and leases | $ | 253 |  |  | $ | 102 |  |  |  |  |  |  |  |  |
Acquisition accounting and fair value adjustments on securities (including OTTI) | 188 |  | 227 |  |  |  |  |  |  |  |  |
Acquisition accounting and fair value adjustments on loans | — |  | 36 |  |  |  |  |  |  |  |  |
Capitalized loan costs |  |  | 46 |  |  |  |  |  |  |  |  |
Right of Use Liability | 32 |  | — |  |  |  |  |  |  |  |  |
Compensation and related benefit obligations | 30 |  | 23 |  |  |  |  |  |  |  |  |
Capitalized research and development costs | — |  | 10 |  |  |  |  |  |  |  |  |
Accrued Expenses | 19 |  | — |  |  |  |  |  |  |  |  |
Net operating loss carryforwards | 8 |  | 15 |  |  |  |  |  |  |  |  |
Other | 22 |  | 18 |  |  |  |  |  |  |  |  |
Gross deferred tax assets | 552 |  |  | 477 |  |  |  |  |  |  |  |  |
Valuation allowance | (5) |  |  | (5) |  |  |  |  |  |  |  |  |
Net deferred tax asset after valuation allowance | $ | 547 |  |  | $ | 472 |  |  |  |  |  |  |  |  |
Deferred Tax Liabilities: |  |  |  |  |  |  |  |  |  |  |
Leases | $ | (492) |  |  | $ | (328) |  |  |  |  |  |  |  |  |
Mortgage servicing rights | (79) |  |  | (105) |  |  |  |  |  |  |  |  |
Premises and equipment | (44) |  |  | (18) |  |  |  |  |  |  |  |  |
Prepaid pension cost | (35) |  |  | (29) |  |  |  |  |  |  |  |  |
Fair value adjustments on loans | (210) |  |  | — |  |  |  |  |  |  |  |  |
Amortizable intangibles | (127) |  |  | (71) |  |  |  |  |  |  |  |  |
Acquisition accounting and fair value adjustments on deposits | (2) |  |  | (9) |  |  |  |  |  |  |  |  |
Right of Use Asset | (32) |  |  | — |  |  |  |  |  |  |  |  |
Deferred Loan fees | (13) |  |  | — |  |  |  |  |  |  |  |  |
Acquisition accounting and fair value adjustments on debt | (9) |  |  | (10) |  |  |  |  |  |  |  |  |
Other | (21) |  |  | (9) |  |  |  |  |  |  |  |  |
Gross deferred tax liabilities | $ | (1,064) |  |  | $ | (579) |  |  |  |  |  |  |  |  |
Net deferred tax liability | $ | (517) |  |  | $ | (107) |  |  |  |  |  |  |  |  |
The deferred tax liability represents the anticipated federal, state, and local tax expenses or benefits that are expected to be realized in future years upon the utilization of the underlying tax attributes comprising said balances. The net deferred tax liability is included in “Other liabilities” in the Consolidated Statements of Condition at December 31, 2023 and 2022. The Company evaluates the need for a deferred tax asset valuation allowances based on a more likely than not standard. The Company’s evaluation is based on its history of reporting positive taxable income in all relevant tax jurisdictions, the length of time available to utilize the net operating loss carryforwards, and the recognition of taxable income in future periods from taxable temporary differences. At December 31, 2023 and December 31, 2022, the Company had a state deferred tax asset for net operating losses (“NOL”) of $8 million and $15 million, respectively (net of federal tax impact) which includes total state net operating loss carryforwards o f $185 million at December 31, 2023, that e xpire if unused in calendar years through 2033. In connection with our ongoing assessment of deferred taxes, we analyzed each state net operating loss separately, determined the amount of net operating loss available and estimated the amount which we expected to expire unused. Based on that assessment, we recorded a valuation allowance of $5 million at December 31, 2023 and 2022 to reduce the DTA to the amount which is more likely than not to be realized. The following table summarizes the Company’s income tax expense for the years ended December 31, 2023, 2022, and 2021:
| December 31,
(in millions) | 2023 |  | 2022 |  | 2021
Federal – current | $ | 156 |  |  | $ | 147 |  |  | $ | 188 |
State and local – current | 59 |  |  | 32 |  |  | 35 |
Total current | 215 |  |  | 179 |  |  | 223 |
Federal – deferred | (137) |  |  | (10) |  |  | (28) |
State and local – deferred | (49) |  |  | 7 |  |  | 15 |
Total deferred | (186) |  |  | (3) |  |  | (13) |
Income tax expense reported in net income | 29 |  |  | 176 |  |  | 210 |
Income tax expense reported in stockholders’ equity related to: |  |  |  |  |
Securities available-for-sale | 15 |  |  | (223) |  |  | (42) |
Pension liability adjustments | 6 |  |  | (6) |  |  | 10 |
Cash flow hedge | (14) |  |  | 23 |  |  | 9 |
Total income taxes | $ | 36 |  |  | $ | (30) |  |  | $ | 187 |
The following table presents a reconciliation of statutory federal income tax expense (benefit) to combined actual income tax expense (benefit) reported in net income for the years ended December 31, 2023, 2022, and 2021:
| December 31,
(in millions) | 2023 |  | 2022 |  | 2021
Statutory federal income tax at 21% | $ | (10) |  |  | $ | 174 |  |  | $ | 169 |
State and local income taxes, net of federal income tax effect | 8 |  |  | 31 |  |  | 40 |
Tax Exempt income | $ | (6) |  |  | $ | — |  |  | $ | — |
Non-taxable bargain gain | (447) |  |  | (33) |  |  | — |
Non-deductible goodwill impairment | $ | 509 |  |  | $ | — |  |  | $ | — |
Non-deductible FDIC deposit insurance premiums | 16 |  |  | 10 |  |  | 9 |
Effect of tax deductibility of deferred compensation | $ | (3) |  |  | $ | (3) |  |  | $ | (3) |
Non-taxable income and expense of BOLI | (9) |  |  | (7) |  |  | (6) |
Non-deductible merger expenses | $ | — |  |  | $ | 3 |  |  | $ | 3 |
Non-deductible compensation expense | 1 |  |  | 4 |  |  | — |
Federal tax credits | $ | (31) |  |  | $ | (1) |  |  | $ | — |
Adjustments relating to prior tax years | 2 |  |  | (1) |  |  | (1) |
Other, net | (1) |  |  | (1) |  |  | (1) |
Total income tax expense | $ | 29 |  |  | $ | 176 |  |  | $ | 210 |
The Company invests in affordable housing projects through limited partnerships that generate federal Low Income Housing Tax Credits. The balances of these investments, which are included in “Other assets” in the Consolidated Statements of Condition, were $372 million and $304 million, respectively, at December 31, 2023 and 2022, and included commitments of $210 million and $183 million that are expected to be funded over the next 5 years. The Company elected to apply the proportional amortization method to these investments. Recognized in the determination of income tax (benefit) expense from operations for the years ended December 31, 2023, 2022, and 2021 were $34 million, $11 million, and $9 million, respectively, of affordable housing tax credits and other tax benefits, and an offsetting $30 million, $10 million, and $9 million, respectively, for the amortization of the related investments. No impairment losses were recognized in relation to these investments for the years ended December 31, 2023, 2022, and 2021. GAAP prescribes a recognition threshold and measurement attribute for use in connection with the obligation of a company to recognize, measure, present, and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on a tax return. As of December 31, 2023 and 2022, the Company had $42 million and $40 million of unrecognized gross tax benefits, respectively. Gross tax benefits do not reflect the federal tax effect associated with state tax amounts. The total amount of net unrecognized tax benefits at December 31, 2023 and 2022 that would have affected the effective tax rate, if recognized, was $34 million a nd $32 million, respectively. Interest and penalties (if any) related to the underpayment of income taxes are classified as a component of income tax expense in the Consolidated Statements of Income and Comprehensive Income. During the years ended December 31, 2023, 2022, and 2021, the Company recognized income tax expense attributed to interest and penalties of $8 million, $4 million, and $4 million, respectively. Accrued interest and penalties on tax liabilities were $34 million and $26 million, respectively, at December 31, 2023 and 2022. The following table summarizes changes in the liability for unrecognized gross tax benefits for the years ended December 31, 2023, 2022, and 2021:
| December 31,
(in millions) | 2023 |  | 2022 |  | 2021
Uncertain tax positions at beginning of year | $ | 40 |  |  | $ | 39 |  |  | $ | 38 |
Additions for tax positions relating to current-year operations | 1 |  |  | 1 |  |  | 2 |
Additions for tax positions relating to prior tax years | 2 |  |  | — |  |  | 1 |
Subtractions for tax positions relating to prior tax years | (1) |  |  | — |  |  | (2) |
Uncertain tax positions at end of year | $ | 42 |  |  | $ | 40 |  |  | $ | 39 |
The Company and its subsidiaries have filed tax returns in many states. The following are the more significant tax filings that are open for examination: •Federal tax filings for tax years 2019 through the present; •New York State tax filings for tax years 2010 through the present; •New York City tax filings for tax years 2011 through the present; and •New Jersey tax filings for tax years 2018 through the present. In addition to other state audits, the Company is currently under examination by the following taxing jurisdictions of significance to the Company: •Federal 2019-2020 •New York State for the tax years 2010 through 2016; and •New York City for the tax years 2011 and 2014. It is reasonably possible that there will be developments within the next twelve months that would necessitate an adjustment to the balance of unrecognized tax benefits, including decreases of up to $21 million due to completion of tax authorities’ exams and the expiration of statutes of limitations. The Bank is subject to a special federal tax provision regarding its frozen tax bad debt reserve. At December 31, 2023, the Bank’s federal tax bad debt base-year reserve was $62 million, with a related federal deferred tax liability of $13 million, which has not been recognized since the Bank does not expect that this reserve will become taxable in the foreseeable future. Events that would result in taxation of this reserve include redemptions of the Bank’s stock or certain excess distributions by the Bank to the Company.

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