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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Note 11 – Income Taxes The current and deferred amounts of income tax expense for 2020, 2019 and 2018 are as follows (dollars in thousands):
|  | 2020 |  |  | 2019 |  |  | 2018 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 19,590 |  |  | $ | 15,509 |  |  | $ | 8,902 |
State |  |  | 7,006 |  |  |  | 5,018 |  |  |  | 954 |
Subtotal |  |  | 26,596 |  |  |  | 20,527 |  |  |  | 9,856 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (3,881) |  |  |  | 916 |  |  |  | 2,455 |
State |  |  | (3,614) |  |  |  | (812) |  |  |  | (1,529) |
Subtotal |  |  | (7,495) |  |  |  | 104 |  |  |  | 926 |
Income tax expense |  | $ | 19,101 |  |  | $ | 20,631 |  |  | $ | 10,782 |
On July 1, 2018 New Jersey Governor Phil Murphy signed Assembly Bill 4202 (“the Bill”) into law. The legislation imposes a temporary surtax on corporations earning New Jersey allocated income in excess of $1 million of 2.5% for tax years beginning on or after January 1, 2018 through December 31, 2019, and of 1.5% for tax years beginning on or after January 1, 2020 through December 31, 2021. However, in 2020, this surtax was extended through December 31, 2023, at the 2.5% level. The legislation also requires combined filing for members of an affiliated group for tax years beginning on or after January 1, 2019, changing New Jersey’s current status as a separate return state, and limits the deductibility of dividends received. Actual income tax expense differs from the tax computed based on pre-tax income and the applicable statutory federal tax rate for the following reasons (dollars in thousands):
|  | 2020 |  |  | 2019 |  |  | 2018 |
Income before income tax expense |  | $ | 90,390 |  |  | $ | 94,026 |  |  | $ | 71,134 |
Federal statutory rate |  |  | 21 | % |  |  | 21 | % |  |  | 21 | %
Computed “expected” Federal income tax expense |  |  | 18,982 |  |  |  | 19,745 |  |  |  | 14,938 |
State tax, net of federal tax benefit |  |  | 1,913 |  |  |  | 3,436 |  |  |  | 1,104 |
Impact of the Tax Cuts and Jobs Act 2017 |  |  | - |  |  |  | - |  |  |  | (790) |
Impact of the “the Bill” |  |  | - |  |  |  | - |  |  |  | (618) |
Bank owned life insurance |  |  | (1,052) |  |  |  | (732) |  |  |  | (650) |
Tax-exempt interest and dividends |  |  | (1,491) |  |  |  | (2,519) |  |  |  | (1,521) |
Tax benefits from stock-based compensation |  |  | 157 |  |  |  | (27) |  |  |  | (1,100) |
Other, net |  |  | 592 |  |  |  | 728 |  |  |  | (581) |
Income tax expense |  | $ | 19,101 |  |  | $ | 20,631 |  |  | $ | 10,782 |
- 89 - Table of Contents CONNECTONE BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 11 – Income Taxes – (continued) The tax effects of temporary differences that give rise to significant portions of the deferred tax asset and deferred tax liability as of December 31, 2020 and 2019 are presented in the following table:
|  | 2020 |  |  | 2019 |
|  | (dollars in thousands) |
Deferred tax assets |  |  |  |  |  |  |  |
Allowance for loan losses |  | $ | 23,399 |  |  | $ | 11,333 |
Purchase accounting |  |  | - |  |  |  | 4,543 |
Pension actuarial losses |  |  | 1,385 |  |  |  | - |
New Jersey net operating loss |  |  | 4,370 |  |  |  | 3,424 |
Deferred compensation |  |  | 1,835 |  |  |  | 1,440 |
Unrealized losses on securities and swaps |  |  | - |  |  |  | 1,509 |
Deferred loan costs, net of fees |  |  | 357 |  |  |  | 20 |
Capital lease |  |  | 225 |  |  |  | 230 |
Nonaccrual interest |  |  | 51 |  |  |  | 69 |
Other |  |  | 4,519 |  |  |  | 2,240 |
Total deferred tax assets |  | $ | 36,141 |  |  | $ | 24,808 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Employee benefit plans |  | $ | (2,161) |  |  | $ | (2,131) |
Purchase accounting |  |  | (1,821) |  |  |  | - |
Pension actuarial gains |  |  | - |  |  |  | (1,062) |
Depreciation |  |  | (187) |  |  |  | (1,146) |
Prepaid expenses |  |  | (201) |  |  |  | (173) |
Market discount accretion |  |  | (428) |  |  |  | (32) |
Unrealized gains on securities and swaps |  |  | (2,171) |  |  |  | - |
Total deferred tax liabilities |  |  | (6,969) |  |  |  | (4,544) |
Net deferred tax assets |  | $ | 29,172 |  |  | $ | 20,264 |
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets for state purposes is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible, while for Federal purposes the deferred tax assets can also be realized through tax carrybacks. Management considers the scheduled reversal of deferred tax liabilities, the projected future taxable income, and tax planning strategies in making this assessment. During 2020 and 2019, based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, the Company believes the net deferred tax assets are more likely than not to be realized. 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. The Company’s federal income tax returns are open and subject to examination from the 2017 tax return year and forward. The Company’s state income tax returns are generally open from the 2015 and later tax return years based on individual state statutes of limitations.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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