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Income Taxes
 12 Months Ended
Jun. 30, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income taxes are as follows:
Years Ended June 30,
202320222021
(In Thousands)
Current income tax expense:
Federal$6,145 $12,720 $12,051 
State2,634 7,057 5,058 
8,779 19,777 17,109 
Deferred income tax expense:
Federal1,902 2,895 2,673 
State887 2,128 2,016 
2,789 5,023 4,689 
Valuation allowance— — (535)
Total income tax expense$11,568 $24,800 $21,263 
The following table presents a reconciliation between the reported income taxes for the periods presented and the income taxes which would be computed by applying the federal income tax rates applicable to those periods. The federal income tax rate of 21% was applicable for the years ended June 30, 2023, 2022 and 2021.
Years Ended June 30,
202320222021
(Dollars In Thousands)
Income before income taxes$52,379 $92,347 $84,496 
Statutory federal tax rate21 %21 %21 %
Federal income tax expense at statutory rate$11,000 $19,393 $17,744 
(Reduction) increases in income taxes resulting from:
Tax exempt interest(143)(266)(345)
State tax, net of federal tax effect2,781 7,257 5,464 
Incentive stock options compensation expense12 45 85 
Income from bank-owned life insurance(1,840)(1,281)(1,255)
Disqualifying disposition on incentive stock options— — (33)
Non-deductible merger-related expenses— — 49 
Bargain purchase gain— — (641)
Other items, net(242)(348)730 
11,568 24,800 21,798 
Valuation allowance— — (535)
Total income tax expense$11,568 $24,800 $21,263 
Effective income tax rate22.09 %26.86 %25.16 %
The effective income tax rate represents total income tax expense divided by income before income taxes. Retained earnings at June 30, 2023, includes approximately $38.4 million of bad debt allowance, pursuant to the IRC, for which income taxes have not been provided. If such amount is used for purposes other than to absorb bad debts, including distributions in liquidation, it will be subject to income tax at the then current rate.
A tax position is recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation process, if any. A tax position that meets the more likely than not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more likely than not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment.
Realization of deferred tax assets is dependent upon the generation of future taxable income or the existence of sufficient taxable income within the carryover period. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. In assessing the need for a valuation allowance, management considers the scheduled reversal of the deferred tax liabilities, the level of historical taxable income, and the projected future taxable income over the periods in which the temporary differences comprising the deferred tax assets will be deductible. Based on its assessments as of June 30, 2023 and 2022, the Company determined it is more likely than not that all deferred tax assets will be realized.
During the year ended June 30, 2021, the Company reversed a valuation allowance totaling $535,000 which was associated with the realization of a capital loss carryforward.
The tax effects of existing temporary differences that give rise to deferred income tax assets and liabilities are as follows:
June 30,
20232022
(In Thousands)
Deferred income tax assets:
Purchase accounting$4,098 $6,327 
Accumulated other comprehensive income:
Defined benefit plans— 26 
Unrealized loss on securities available for sale45,018 34,104 
Allowance for credit losses14,211 13,809 
Benefit plans2,603 2,494 
Compensation1,440 2,023 
Stock-based compensation3,161 2,834 
Uncollected interest1,313 1,705 
Depreciation2,335 1,931 
Net operating loss carryover2 4 
Capital loss carryforward191 141 
Other items839 844 
75,211 66,242 
Deferred income tax liabilities:
Deferred loan fees and costs1,710 838 
Accumulated other comprehensive income:
Derivatives16,940 11,542 
Defined benefit plans78 — 
Goodwill4,510 4,510 
Other items— 2 
23,238 16,892 
Net deferred income tax asset$51,973 $49,350 
The Company has various state and local NOL carryforwards which will begin to expire in the year ending June 30, 2025.
The Company and its subsidiaries are subject to U.S. federal income tax, as well as income tax of the state of New Jersey and various other states. The Company is generally no longer subject to examination by federal, state and local taxing authorities for tax years prior to June 30, 2020.