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INCOME TAXES

12 Months Ended

Dec. 31, 2017

INCOME TAXES

13. INCOME TAXES

The following table details the components of income tax expense:

		Year Ended December 31,
(In thousands)		2017				2016				2015
Current:
Federal		$	8,762			$	14,730			$	8,248
State			937				780				1,230
Total current			9,699				15,510				9,478
Deferred:
Federal			10,251				2,388				1,457
State			(1,004	)			897				(157	)
Total deferred			9,247				3,285				1,300
Total income tax expense		$	18,946			$	18,795			$	10,778

The following table is a reconciliation of the expected federal income tax expense at the statutory tax rate to the actual provision:

		Year Ended December 31,
		2017								2016								2015
(Dollars in thousands)		Amount				Percentage of Pre-tax Earnings				Amount				Percentage of Pre-tax Earnings				Amount				Percentage of Pre-tax Earnings
Federal income tax expense computed by applying the statutory rate to income before income taxes		$	13,820				35	%		$	19,000				35	%		$	11,161				35	%
Tax exempt income			(1,808	)			(5	)			(1,661	)			(3	)			(1,356	)			(4	)
State taxes, net of federal income tax benefit			725				2				1,090				2				1,087				3
Deferred tax asset remeasurement (1)			7,572				19				-				-				-				-
Other			(1,363	)			(3	)			366				1				(114	)			-
Income tax expense		$	18,946				48	%		$	18,795				35	%		$	10,778				34	%

(1)

2017 amount includes a charge to write-down deferred tax assets due to the enactment of the Tax Act of $7.6 million.

The following table summarizes the composition of deferred tax assets and liabilities:

		December 31,
(In thousands)		2017				2016
Deferred tax assets:
Allowance for loan losses and off-balance sheet credit exposure		$	9,906			$	11,401
Net unrealized losses on securities			4,650				6,019
Compensation and related benefit obligations			2,508				2,226
Purchase accounting fair value adjustments			7,576				14,376
Net change in pension and other post-retirement benefits plans			2,279				3,249
Net operating loss carryforward			1,997				2,470
Other			1,119				756
Total deferred tax assets			30,035				40,497

Deferred tax liabilities:
Pension and SERP expense			(3,915	)			(4,715	)
Depreciation			(808	)			(1,537	)
REIT undistributed net income			(2,146	)			(86	)
Net deferred loan costs and fees			(1,406	)			(1,844	)
Net gain on cash flow hedges			(792	)			(341	)
State and local taxes			(1,255	)			(1,862	)
Other			(221	)			(179	)
Total deferred tax liabilities			(10,543	)			(10,564	)
Net deferred tax asset		$	19,492			$	29,933

On December 22, 2017, the President signed the Tax Act, resulting in significant changes to existing tax law, including a lower federal statutory tax rate of 21%. The Tax Act was generally effective as of January 1, 2018. In the fourth quarter of 2017, the Company recorded a charge of $7.6 million, which consisted primarily of the deferred tax asset remeasurement from the previous 35% federal statutory rate to the new 21% federal statutory tax rate.

On December 22, 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides a measurement period of up to one year from the enactment date to refine and complete the accounting. The Company has completed its accounting for the effects of the Tax Act, and has made reasonable estimates of the effect of the change in federal statutory tax rate and remeasurement of deferred tax assets based on the rate at which they are expected to reverse in the future.

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of the State and City of New York and the State of New Jersey. The Company is no longer subject to examination by taxing authorities for years before 2014. There are no unrecorded tax benefits, and the Company does not expect the total amount of unrecognized income tax benefits to significantly increase in the next twelve months.

In connection with the acquisition of FNBNY, the Company acquired a federal net operating loss (“NOL”) carryforward subject to Internal Revenue Code Section 382. The Company recorded a deferred tax asset that it expects to realize within the carryforward period. At December 31, 2017, the remaining federal NOL carryforward was $3.5 million. In connection with the CNB and FNBNY acquisitions, the Company acquired New York State and New York City NOL carryforwards. The Company recorded a deferred tax asset that it expects to realize within the carryforward period. At December 31, 2017, the remaining New York State and New York City NOL carryforwards were$18.0 million and $8.8 million, respectively.