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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

(18.) INCOME TAXES

The income tax expense for the years ended December 31 consisted of the following (in thousands):

 

 

2023

 

 

2022

 

 

2021

 

Current tax expense:

 

 

 

 

 

 

 

 

 

Federal

 

$

13,302

 

 

$

15,371

 

 

$

11,453

 

State

 

 

835

 

 

 

3,408

 

 

 

2,854

 

Total current tax expense

 

 

14,137

 

 

 

18,779

 

 

 

14,307

 

Deferred tax (benefit) expense:

 

 

 

 

 

 

 

 

 

Federal

 

 

(1,136

)

 

 

(3,250

)

 

 

4,384

 

State

 

 

(212

)

 

 

(1,132

)

 

 

834

 

Total deferred tax (benefit) expense

 

 

(1,348

)

 

 

(4,382

)

 

 

5,218

 

Total income tax expense

 

$

12,789

 

 

$

14,397

 

 

$

19,525

 

 

Income tax expense differed from the statutory federal income tax rate for the years ended December 31 as follows:

 

 

 

2023

 

 

2022

 

 

2021

 

Statutory federal tax rate

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

Increase (decrease) resulting from:

 

 

 

 

 

 

 

 

 

Tax exempt interest income

 

 

(0.8

)

 

 

(0.9

)

 

 

(0.7

)

Tax credits and adjustments

 

 

(2.1

)

 

 

(2.6

)

 

 

(2.6

)

Non-taxable earnings on company owned life insurance

 

 

0.9

 

 

 

-

 

 

 

(0.6

)

State taxes, net of federal tax benefit

 

 

0.8

 

 

 

2.5

 

 

 

3.0

 

Nondeductible expenses

 

 

0.3

 

 

 

0.2

 

 

 

-

 

Other, net

 

 

0.2

 

 

 

0.1

 

 

 

-

 

Effective tax rate

 

 

20.3

%

 

 

20.3

%

 

 

20.1

%

 

Total income tax expense (benefit) was as follows for the years ended December 31 (in thousands):

 

 

 

2023

 

 

2022

 

 

2021

 

Income tax expense

 

$

12,789

 

 

$

14,397

 

 

$

19,525

 

Shareholder’s equity

 

 

6,044

 

 

 

(42,812

)

 

 

(5,282

)

 

The Company recognizes deferred income taxes for the estimated future tax effects of differences between the tax and financial statement bases of assets and liabilities considering enacted tax laws. These differences result in deferred tax assets and liabilities, which are included in other assets in the Company’s consolidated statements of financial condition. The Company also assesses the likelihood that deferred tax assets will be realizable based on, among other considerations, future taxable income and establishes, if necessary, a valuation allowance for those deferred tax assets determined to not likely be realizable. A deferred tax asset valuation allowance is recognized if, based on the weight of available evidence (both positive and negative), it is more likely than not that some portion or all of the deferred tax assets will not be realized. The future realization of deferred tax benefits depends upon the existence of sufficient taxable income within the carry-back and carry-forward periods. Management’s judgment is required in determining the appropriate recognition of deferred tax assets and liabilities, including projections of future taxable income.

In 2023 and 2022, the Company recognized the impact of its investments in limited partnerships that generated qualifying tax credits resulting in a $3.0 million and $2.6 million reduction in income tax expense, respectively, and an $252 thousand and $815 thousand net loss recorded in noninterest income, respectively. See Note 1, Summary of Significant Accounting Policies, for the Company’s accounting policy for income taxes and these tax credit investments.

(18.) INCOME TAXES (Continued)

The Company’s 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 the deferred tax assets and deferred tax liabilities are as follows at December 31 (in thousands):

 

 

 

2023

 

 

2022

 

Deferred tax assets:

 

 

 

 

 

 

Allowance for credit losses

 

$

14,011

 

 

$

12,695

 

Leases – right of use obligations

 

 

8,657

 

 

 

8,505

 

Deferred compensation

 

 

1,471

 

 

 

1,615

 

Investment in limited partnerships

 

 

785

 

 

 

1,381

 

SERP agreements

 

 

92

 

 

 

179

 

Share-based compensation

 

 

930

 

 

 

975

 

Net unrealized loss on securities available for sale

 

 

38,549

 

 

 

44,312

 

Accrued pension costs

 

 

297

 

 

 

229

 

Other

 

 

1,395

 

 

 

1,206

 

Gross deferred tax assets

 

 

66,187

 

 

 

71,097

 

Deferred tax liabilities:

 

 

 

 

 

 

Leases – right of use assets

 

 

8,077

 

 

 

7,964

 

Prepaid expenses

 

 

929

 

 

 

637

 

Intangible assets

 

 

2,760

 

 

 

2,580

 

Depreciation and amortization

 

 

3,833

 

 

 

4,080

 

Loan servicing assets

 

 

354

 

 

 

377

 

Deferred loan origination costs

 

 

154

 

 

 

401

 

Other

 

 

1,347

 

 

 

1,631

 

Gross deferred tax liabilities

 

 

17,454

 

 

 

17,670

 

Net deferred tax asset

 

$

48,733

 

 

$

53,427

 

Based upon the Company’s historical and projected future levels of pre-tax and taxable income, the scheduled reversals of taxable temporary differences to offset future deductible amounts, and prudent and feasible tax planning strategies, management believes it is more likely than not that the deferred tax assets will be realized. Therefore, no valuation allowance has been recorded as of December 31, 2023 and 2022.

The Company and its subsidiaries are primarily subject to federal and New York income taxes. The federal income tax years currently open for audit are 2018 through 2023. The New York income tax years currently open for audit are 2020 through 2023.

At December 31, 2023, the Company had no federal or New York net operating loss, capital loss or tax credit carryforwards.

 

The Company’s unrecognized tax benefits and changes in unrecognized tax benefits were not significant as of or for the years ended December 31, 2023, 2022 and 2021. There were no material interest or penalties recorded in the income statement in income tax expense for the years ended December 31, 2023, 2022 and 2021. As of December 31, 2023 and 2022, there were no amounts accrued for interest or penalties related to uncertain tax positions.