INCOME TAXES

12 Months Ended

Dec. 31, 2023

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)	2023			2022			2021
Federal:
Current expense	$	25,814		$	27,228		$	7,400
Deferred (benefit)/expense		(11,862	)		(7,817	)		7,971
State:
Current expense		7,889			7,511			4,188
Deferred (benefit)/expense		(3,414	)		1,176			1,481
Total income tax expense	$	18,427		$	28,098		$	21,040

Total income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 21 percent for 2023, 2022, and 2021, respectively, to income before taxes as a result of the following:

(In thousands)	2023			2022			2021
"Tax expense computed at applicable statutory rate"	$	14,129		$	21,513		$	16,309
(Decrease)/increase in taxes resulting from:
Tax-exempt income		(261	)		(236	)		(146	)
State income taxes, net of Federal benefit		3,535			7,109			4,789
Bank owned life insurance income		(266	)		(261	)		(356	)
Life insurance expense		238			21			199
Interest disallowance		143			34			14
Meals and entertainment expense		78			39			39
Stock-based compensation		889			(130	)		9
Other		(58	)		9			183
Total income tax expense	$	18,427		$	28,098		$	21,040

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)	2023		2022
Deferred tax assets:
Allowance for credit losses	$	17,540	$	14,924
Tax net operating loss carryforward		262		648
Capital loss carryforward		1,763		—
Organization costs		7		7
Unrealized loss on securities available for sale		25,408		25,424
Unrealized loss on equity security		488		544
Stock compensation expense		2,621		3,084
Nonaccrual interest		115		202
Accrued compensation		7,201		5,277
Accrued expenses		1,079		803
Lease liabilities		3,328		3,598
Finance lease		672		1,072
Other		1,080		727
Total gross deferred tax assets	$	61,564	$	56,310
Deferred tax liabilities:
Lease financing	$	48,002	$	58,382
Cash flow hedge		1,883		2,528
Deferred loan origination costs and fees		1,878		1,827
Deferred income		4,479		4,608
Amortization of intangible assets		1,245		854
Lease right-of-use asset		3,126		3,379
Other		446		164
Total gross deferred tax liabilities		61,059		71,742
Net deferred tax asset/(liability)	$	505	$	(15,432	)

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, 2023, the Company had $5.1 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, 2022, the Company had a state NOL carryforward of $14.5 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, 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. On July 3, 2023, New Jersey enacted comprehensive tax legislation which included the expiration of the 2.5 percent surtax as of 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 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 2020 or by state and local tax authorities for years prior to 2019. The tax years of 2020, 2021 and 2022 remain open to federal examination.