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Income Taxes
 12 Months Ended
Jun. 30, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income taxes are as follows:
Years Ended June 30,
202420232022
(In Thousands)
Current income tax expense:
Federal$4,352 $6,145 $12,720 
State2,406 2,634 7,057 
6,758 8,779 19,777 
Deferred income tax expense:
Federal4 1,902 2,895 
State(871)887 2,128 
(867)2,789 5,023 
Total income tax expense$5,891 $11,568 $24,800 
The following table presents a reconciliation between the reported income taxes for the periods presented and the income taxes which would be computed by applying the federal income tax rates applicable to those periods. The federal income tax rate of 21% was applicable for the years ended June 30, 2024, 2023 and 2022.
Years Ended June 30,
202420232022
(Dollars In Thousands)
(Loss) income before income taxes$(80,776)$52,379 $92,347 
Statutory federal tax rate21 %21 %21 %
Federal income tax expense at statutory rate$(16,963)$11,000 $19,393 
(Reduction) increases in income taxes resulting from:
Tax exempt interest(68)(143)(266)
State tax, net of federal tax effect1,213 2,781 7,257 
Incentive stock options compensation expense5 12 45 
Income from bank-owned life insurance(1,902)(1,840)(1,281)
Goodwill impairment18,935 — — 
Surrender of bank-owned life insurance policies4,477 — — 
Other items, net194 (242)(348)
5,891 11,568 24,800 
Total income tax expense$5,891 $11,568 $24,800 
Effective income tax rate(7.29)%22.09 %26.86 %
The effective income tax rate represents total income tax expense divided by income before income taxes. Retained earnings at June 30, 2024, 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, 2024 and 2023, the Company determined it is more likely than not that all deferred tax assets will be realized.
The tax effects of existing temporary differences that give rise to deferred income tax assets and liabilities are as follows:
June 30,
20242023
(In Thousands)
Deferred income tax assets:
Purchase accounting$3,543 $4,098 
Accumulated other comprehensive income:
Unrealized loss on securities available for sale37,683 45,018 
Allowance for credit losses12,786 14,211 
Benefit plans2,605 2,603 
Compensation1,303 1,440 
Stock-based compensation2,923 3,161 
Uncollected interest1,177 1,313 
Depreciation2,309 2,335 
Net operating loss carryover889 2 
Capital loss carryforward614 191 
Other items780 839 
66,612 75,211 
Deferred income tax liabilities:
Deferred loan fees and costs1,690 1,710 
Accumulated other comprehensive income:
Derivatives12,085 16,940 
Defined benefit plans98 78 
Goodwill2,400 4,510 
16,273 23,238 
Net deferred income tax asset$50,339 $51,973 
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, 2021.