XML 39 R22.htm IDEA: XBRL DOCUMENT v3.20.4
Income Taxes
 12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income TaxesThe Tax Cuts and Jobs Act ("Tax Act") was signed into law on December 22, 2017. Included as part of the law, was a permanent reduction in the federal corporate income tax rate from 35% to 21% effective January 1, 2018. Based upon the change in the tax rate, the Company revalued its net deferred tax asset at December 31, 2017.
The current and deferred amounts of income tax expense (benefit) for the years ended December 31, 2020, 2019 and 2018 are as follows (in thousands):
 Years ended December 31,
 202020192018
Current:
Federal$27,143 22,427 41,578 
State11,389 10,354 2,493 
Total current38,532 32,781 44,071 
Deferred:
Federal(5,908)1,650 (17,302)
State(2,021)24 (1,239)
Total deferred(7,929)1,674 (18,541)
$30,603 34,455 25,530 

The Company recorded a deferred tax expense (benefit) of $5.2 million, $6.6 million and ($2.4) million during 2020, 2019 and 2018, respectively, related to the unrealized gains (losses) on available for sale debt securities, which is reported in accumulated other comprehensive income (loss), net of tax. Additionally, the Company recorded a deferred tax expense (benefit) of $1.4 million, ($463,000) and $379,000 in 2020, 2019 and 2018, respectively, related to the amortization of post-retirement benefit obligations, which is reported in accumulated other comprehensive income (loss), net of tax.
A reconciliation between the amount of reported total income tax expense and the amount computed by multiplying the applicable statutory income tax rate is as follows (in thousands):
 Years ended December 31,
 202020192018
Tax expense at statutory rates$26,786 30,889 30,223 
Increase (decrease) in taxes resulting from:
State tax, net of federal income tax benefit7,400 8,197 1,002 
Tax-exempt interest income(2,609)(3,082)(2,839)
Bank-owned life insurance(1,363)(1,322)(1,158)
Other, net389 (227)(1,698)
$30,603 34,455 25,530 
The net deferred tax asset is included in other assets in the Consolidated Statements of Financial Condition. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2020 and 2019 are as follows (in thousands):
20202019
Deferred tax assets:
Allowance for credit losses on loans$26,156 14,313 
Allowance for credit loss OBS1,295 — 
Post-retirement benefit6,924 6,946 
Deferred compensation839 1,175 
Contingent Consideration714 — 
Purchase accounting adjustments3,099 1,629 
Depreciation331 750 
SERP733 688 
ESOP1,377 1,606 
Stock-based compensation4,481 4,747 
Payroll Protection Program fees2,268 — 
Non-accrual interest225 417 
Federal Net Operating Loss ("NOL")280 321 
Net unrealized loss on hedging activities1,717 — 
Pension liability adjustments376 1,821 
Other925 1,223 
Total gross deferred tax assets51,740 35,636 
Deferred tax liabilities:
Pension expense7,340 7,017 
Deferred loan costs4,532 5,064 
Investment securities, principally due to accretion of discounts79 70 
Intangibles1,723 1,393 
Originated mortgage servicing rights160 140 
Unrealized gain on available for sale debt securities7,802 3,038 
Net unrealized gain on hedging activities— 114 
Total gross deferred tax liabilities21,636 16,836 
Net deferred tax asset$30,104 18,800 
Retained earnings at December 31, 2020 includes approximately $51.8 million for which no provision for income tax has been made. This amount represents an allocation of income to bad debt deductions for tax purposes only. Events that would result in taxation of these reserves include the failure to qualify as a bank for tax purposes, distributions in complete or partial liquidation, stock redemptions and excess distributions to stockholders. At December 31, 2020, the Company had an unrecognized tax liability of $13.4 million with respect to this reserve.
As a result of the Beacon acquisition in 2011, the Company acquired federal net operating loss carryforwards. There are approximately $1.3 million of NOL carryforwards available to offset future taxable income as of December 31, 2020. If not utilized, these carryforwards will expire in 2031. Pursuant to the Tax Act, NOLs created after December 31, 2017 may be carried forward indefinitely and utilization is subject to 80% of taxable income. The federal NOLs are subject to a combined annual Code Section 382 limitation in the amount of approximately $197,000. Management has determined that it is more likely than not that it will realize the net deferred tax asset based upon the nature and timing of the items listed above. In order to fully realize the net deferred tax asset, the Company will need to generate future taxable income. Management has projected that the Company will generate sufficient taxable income to utilize the net deferred tax asset; however, there can be no assurance that such levels of taxable income will be generated.
The Company’s policy is to report interest and penalties, if any, related to unrecognized tax benefits in income tax expense. The Company did not have any liabilities for uncertain tax positions or any known unrecognized tax benefits at December 31, 2020 and 2019.
The Company and its subsidiaries file a consolidated U.S. Federal income tax return. For tax periods prior to December 31, 2018, New Jersey tax law does not and has not allowed for a taxpayer to file a tax return on a combined or consolidated basis with another member of the affiliated group where there is common ownership. As a result of this enacted legislation that New Jersey effectuated on July 1, 2018, beginning in 2019, the Company and its subsidiaries is required to file a combined New Jersey state income tax return on apportioned and allocated income. Also, the Company and its subsidiaries file a combined New York State income tax return on apportioned and allocated income. The Company, through its bank subsidiary, files a Pennsylvania Mutual Thrift Institution Tax return.
The Company's Federal and New York State income tax returns are open for examination from 2017, the New Jersey State income tax returns are open for examination from 2016, and the Pennsylvania Mutual Thrift Institutions return is open from 2017. During the fourth quarter of 2017, the Internal Revenue Service completed its examination of the Company's 2014 Federal tax return. The completion of the examination did not have a material impact on the Company's effective income tax rate. The examination of the Company's 2016 and 2015 New York State tax returns was completed in the first quarter of 2019, and did not have a material impact on the Company's effective income tax rate. The Company's 2017 and 2018 New York State returns are currently under audit.