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INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES

11. INCOME TAXES

The income tax expense included in the consolidated financial statements for the years ended December 31 is allocated as follows:

 

(In thousands)

 

2022

 

 

2021

 

 

2020

 

Federal:

 

 

 

 

 

 

 

 

 

Current expense/(benefit)

 

$

27,228

 

 

$

7,400

 

 

$

(4,741

)

Deferred (benefit)/expense

 

 

(7,817

)

 

 

7,971

 

 

 

10,161

 

State:

 

 

 

 

 

 

 

 

 

Current expense

 

 

7,511

 

 

 

4,188

 

 

 

2,327

 

Deferred expense/(benefit)

 

 

1,176

 

 

 

1,481

 

 

 

(1,936

)

Total income tax expense

 

$

28,098

 

 

$

21,040

 

 

$

5,811

 

 

Total income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 21 percent for 2022, 2021, and 2020, respectively, to income before taxes as a result of the following:

 

(In thousands)

 

2022

 

 

2021

 

 

2020

 

"Computed expected tax expense"

 

$

21,513

 

 

$

16,309

 

 

$

6,721

 

(Decrease)/increase in taxes resulting from:

 

 

 

 

 

 

 

 

 

Tax-exempt income

 

 

(236

)

 

 

(146

)

 

 

(287

)

State income taxes, net of Federal benefit

 

 

7,109

 

 

 

4,789

 

 

 

1,813

 

Bank owned life insurance income

 

 

(261

)

 

 

(356

)

 

 

(267

)

Life insurance expense

 

 

21

 

 

 

199

 

 

 

225

 

Interest disallowance

 

 

34

 

 

 

14

 

 

 

66

 

Meals and entertainment expense

 

 

39

 

 

 

39

 

 

 

40

 

Stock-based compensation

 

 

(130

)

 

 

9

 

 

 

569

 

Impact of CARES Act

 

 

—

 

 

 

—

 

 

 

(3,009

)

Other

 

 

9

 

 

 

183

 

 

 

(60

)

Total income tax expense

 

$

28,098

 

 

$

21,040

 

 

$

5,811

 

 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31 are as follows:

 

(In thousands)

 

2022

 

 

2021

 

Deferred tax assets:

 

 

 

 

 

 

Allowance for credit losses

 

$

14,924

 

 

$

16,408

 

Tax net operating loss carryforward

 

 

648

 

 

 

1,180

 

Organization costs

 

 

7

 

 

 

8

 

Cash flow hedge

 

 

—

 

 

 

978

 

Unrealized loss on securities available for sale

 

 

25,424

 

 

 

3,061

 

Unrealized loss on equity security

 

 

544

 

 

 

84

 

Stock option expense

 

 

3,084

 

 

 

2,541

 

Nonaccrual interest

 

 

202

 

 

 

97

 

Accrued compensation

 

 

5,277

 

 

 

5,631

 

Accrued expenses

 

 

803

 

 

 

472

 

Lease liabilities

 

 

3,598

 

 

 

2,689

 

Finance lease

 

 

1,072

 

 

 

732

 

Other

 

 

727

 

 

 

183

 

Total gross deferred tax assets

 

$

56,310

 

 

$

34,064

 

Deferred tax liabilities:

 

 

 

 

 

 

Lease financing

 

$

58,382

 

 

$

64,071

 

Cash flow hedge

 

 

2,528

 

 

 

—

 

Deferred loan origination costs and fees

 

 

1,827

 

 

 

1,757

 

Deferred income

 

 

4,608

 

 

 

4,543

 

Amortization of intangible assets

 

 

854

 

 

 

369

 

Lease right-of-use asset

 

 

3,379

 

 

 

2,600

 

Other

 

 

164

 

 

 

46

 

      Total gross deferred tax liabilities

 

 

71,742

 

 

 

73,386

 

Net deferred tax liability

 

$

(15,432

)

 

$

(39,322

)

 

Based upon taxes paid and projected future taxable income, Management believes that it is more likely than not that the Company’s gross deferred tax assets will be realized. However, there can be no assurance that such assets will be realized if circumstances change.

At December 31, 2022, the Company had $14.5 million of state net operating loss ("NOL") carryforward available to offset future taxable income. These operating loss carryforwards have various expirations beginning in 2032. At December 31, 2021, the Company had a state NOL carryforward of $16.8 million. At December 31, 2022, the Company had no unrecognized tax benefits. The Company recognizes interest accrued related to uncertain tax positions and penalties as income tax expense.

On July 1, 2018, the New Jersey established a 2.5 percent surtax on businesses that have New Jersey allocated net income in excess of $1.0 million. The surtax was effective as of January 1, 2018 and continued through 2020. In September 2020, New Jersey extended the surtax through December 31, 2023. The Bank made an adjustment to income tax expense and deferred tax assets/liabilities to reflect the new state tax rate.

The CARES Act was signed into law on March 27, 2020 and subsequently has been amended several times. Among other provisions, the CARES Act allowed a five-year carryback of any NOL generated in a taxable year beginning after December 31, 2017 and before January 1, 2021. The tax benefit recorded in 2020 was primarily due to a $3.0 million Federal income tax benefit that resulted from the federal NOL carryback. The Company had a $23 million operating loss for tax purposes in 2018 (when the Federal tax rate was 21 percent) resulting from accelerated tax depreciation. The Company carried back all eligible NOLs and has no federal NOLs remaining.

The Company is subject to U.S. Federal income tax as well as income tax of various state jurisdictions. The Company is no longer subject to federal examination for tax years prior to 2019 or by state and local tax authorities for years prior to 2017. The tax years of 2019, 2020 and 2021 remain open to federal examination.