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Note 11 - Income Taxes
 12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 11 – Income Taxes

 

The current and deferred amounts of income tax expense for 2024, 2023 and 2022 are as follows (dollars in thousands):

 

  

2024

  

2023

  

2022

 

Current:

            

Federal

 $15,556  $16,185  $33,169 

State

  11,158   9,635   13,247 

Subtotal

  26,714   25,820   46,416 

Deferred:

            

Federal

  258   2,903   (3,353)

State

  (2,298)  1,232   2,950 

Subtotal

  (2,040)  4,135   (403)

Income tax expense

 $24,674  $29,955  $46,013 

 

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) December 31,

 

  

2024

  

2023

  

2022

 

Income before income tax expense

 $98,467  $116,958  $171,224 

Federal statutory rate

  21%  21%  21%

Computed “expected” Federal income tax expense

  20,678   24,561   35,957 

State tax, net of federal tax benefit

  6,514   9,404   13,314 

162M adjustment

  469   779   777 

Bank owned life insurance

  (1,500)  (1,326)  (1,175)

Tax-exempt interest and dividends

  (2,632)  (2,514)  (1,969)

Tax benefits from stock-based compensation

  109   (66)  (417)

Other, net

  1,036   (883)  (474)

Income tax expense

 $24,674  $29,955  $46,013 

 

 

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, 2024 and 2023 are presented in the following table:

 

  

2024

  

2023

 
  

(dollars in thousands)

 

Deferred tax assets

        

Allowance for credit losses

 $24,891  $23,973 

Depreciation

  6   65 

Pension actuarial losses

  272   897 

New Jersey net operating loss

  2,683   1,187 

Deferred compensation

  4,919   5,240 

Unrealized losses on available-for-sale securities

  25,959   23,365 

Deferred loan costs, net of fees

  1,608   1,628 

Finance lease

  163   192 

Nonaccrual interest

  275   111 

Operating lease liability

  4,671   3,897 

Other

  1,519   1,887 

Total deferred tax assets

 $66,966  $62,442 

Deferred tax liabilities

        

Employee benefit plans

 $(2,515) $(2,439)

Purchase accounting

  (1,599)  (1,660)

Prepaid expenses

  (1,551)  (1,386)

Unrealized gains on derivatives

  (8,790)  (10,676)

Right of use asset

  (4,304)  (3,545)

Other

  (1,240)  (1,664)

Total deferred tax liabilities

  (19,999)  (21,370)

Net deferred tax assets

 $46,967  $41,072 

 

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, the projected future taxable income, and tax planning strategies in making this assessment. During 2024 and 2023, 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.

 

 

On June 28, 2024, the State of New Jersey enacted legislation (A.B. 4704) introducing a 2.5% surtax, termed the "Corporate Transit Fee," applicable to corporations with New Jersey allocated taxable net income exceeding $10 million. This fee is effective for privilege periods beginning on or after January 1, 2024, through December 31, 2028, and is in addition to the standard Corporation Business Tax (CBT) rate of 9%, resulting in a combined tax rate of 11.5% for affected corporations. The Corporate Transit Fee applies to the entire taxable net income of corporations surpassing the $10 million threshold, not just the income above this amount. For combined group filers, the fee is assessed at the group level, and the income of all members, including public utilities and S corporations, is considered in determining the group's liability.

 

The Company files income tax returns in multiple jurisdictions and is subject to examination by federal, state, and local taxing authorities. The Company regularly assesses developments in tax laws and regulations that may impact its effective tax rate and financial reporting. The Company’s federal income tax returns that are currently open and subject to examination are from the tax year 2021 return and forward. The Company’s state income tax returns are generally open from the tax year 2020 and forward based on individual state statutes of limitations.

 

As of December 31, 2024, the Company has $29.5 million in New Jersey net operating loss (NOL). Of that total, $15.2 million is set to expire on December 31, 2043 and $14.3 million is set to expire on December 31, 2044.