INCOME TAXES

12 Months Ended

Dec. 31, 2023

INCOME TAXES

INCOME TAXES

NOTE 10 — INCOME TAXES

Income tax expense consisted of the following (in thousands):

	Year Ended December 31,
	2023		2022		2021
Current
Federal	$	21,503	$	27,311	$	16,883
State and local		10,947		14,162		12,252
Total current		32,450		41,473		29,135
Deferred
Federal		(2,662)		(1,919)		(405)
State and local		(138)		(2,081)		285
Total deferred		(2,800)		(4,000)		(120)
Total income tax expense	$	29,650	$	37,473	$	29,015

Deferred tax assets and liabilities consist of the following (in thousands):

	At December 31,
	2023		2022
Deferred tax assets:
Allowance for credit losses	$	17,219	$	13,698
Lease liabilities		13,793		14,782
Net unrealized loss on securities available for sale		23,098		27,084
Off balance sheet reserves		351		55
Restricted stock		1,666		1,140
Tangible asset		3		7
Non-qualified stock options		—		285
Other		147		95
Total gross deferred tax assets		56,277		57,146
Deferred tax liabilities:
Right of use lease asset		12,550		13,551
Depreciation and amortization		4,024		4,390
Net unrealized gain on interest rate derivatives		825		3,302
Prepaid assets		748		548
Other		—		—
Total gross deferred tax liabilities		18,147		21,791
Net deferred tax asset, included in other assets	$	38,130	$	35,355

The following is a reconciliation of the Company’s statutory federal income tax rate to its effective tax rate (in thousands):

	For the year ended December 31,
	2023				2022				2021
	Tax expense/				Tax expense/				Tax expense/
	(benefit)		Rate		(benefit)		Rate		(benefit)		Rate
Pretax income at statutory rates	$	22,453	21.00	%	$	20,349	21.00	%	$	18,810	21.00	%
State and local taxes, net of federal income tax benefit		8,539	7.99			9,544	9.85			9,904	11.06
Nondeductible expenses		(940)	(0.88)			8,175	8.44			680	0.76
Equity compensation		(1,063)	(0.99)			(302)	(0.31)			(467)	(0.52)
Tax-exempt income, net		(104)	(0.10)			(106)	(0.11)			(51)	(0.06)
Other		765	0.71			(187)	(0.20)			139	0.15
Effective income tax expense/rate	$	29,650	27.73	%	$	37,473	38.67	%	$	29,015	32.39	%

The Company and the Bank filed consolidated Federal, California, Connecticut, Kentucky, Massachusetts, New Jersey, New York State, New York City, and Tennessee income tax returns in 2022 and 2023. The Bank is subject to Alabama, Florida, and Missouri income taxes on a separate company basis.

As of December 31, 2023 and 2022, there are no unrecognized tax benefits, and the Company does not expect this to significantly change in the next twelve months. Except for California, Kentucky, and New Jersey, the Company is no longer subject to examination by the U.S. federal and state or local tax authorities for years prior to 2020. California, Kentucky, and New Jersey are no longer subject to examination for years prior to 2019. As of December 31, 2023, the Company was under audit in New York for the 2018 tax year, and in New York City for the 2019, 2020 and 2021 tax years. Due to the New York State audit, the 2018 and 2019 tax year for New York State statute of limitations has been extended to December 31, 2024. Due to the New York City audits, the 2019 tax year New York City statute of limitation has been extended to December 31, 2024.

As of December 31, 2023, the Company had net deferred tax assets of $38.1 million. These deferred tax assets can only be realized if the Company generates taxable income in the future. The Company regularly evaluates the feasibility of the deferred tax asset positions. In determining whether a valuation allowance is necessary, the Company considers the level of taxable income in prior years to the extent that carrybacks are permitted under current tax laws, as well as estimates of future pre-tax and taxable income and tax planning strategies that would, if necessary, be implemented. The Company expects to realize the deferred tax assets over the allowable carryback and/or carryforward periods. Therefore, no valuation allowance was deemed necessary against the deferred tax assets as of December 31, 2023. However, if an unanticipated event occurred that materially changed pre-tax and taxable income in future periods, a valuation allowance may become necessary and could have a material effect on our consolidated financial statements.