INCOME TAXES

12 Months Ended

Dec. 31, 2016

INCOME TAXES

INCOME TAXES

11. INCOME TAXES

The following table details the components of income tax expense:

	Year Ended December 31,
(In thousands)	2016		2015			2014
Current:
Federal	$	14,730	$	8,248		$	3,926
State		780		1,230			507
Total current		15,510		9,478			4,433
Deferred:
Federal		2,388		1,457			2,187
State		897		(157	)		619
Total deferred		3,285		1,300			2,806
Total income tax expense	$	18,795	$	10,778		$	7,239

The following table is a reconciliation of the expected Federal income tax expense at the statutory tax rate to the actual provision:

	Year Ended December 31,
	2016						2015						2014
(Dollars in thousands)	Amount			Percentage of Pre-tax Earnings			Amount			Percentage of Pre-tax Earnings			Amount			Percentage of Pre-tax Earnings
Federal income tax expense computed by applying the statutory rate to income before income taxes	$	19,000			35	%	$	11,161			35	%	$	7,141			34	%
Tax exempt interest		(986	)		(2	)		(927	)		(3	)		(665	)		(3	)
State taxes, net of federal income tax benefit		1,090			2			1,087			3			743			4
Other		(309	)		—			(543	)		(1	)		20			—
Income tax expense	$	18,795			35	%	$	10,778			34	%	$	7,239			35	%

The following table summarizes the composition of deferred tax assets and liabilities:

	December 31,
(In thousands)	2016			2015
Deferred tax assets:
Allowance for loan losses and off-balance sheet credit exposure	$	11,401		$	9,154
Net unrealized losses on securities		6,019			3,224
Compensation and related benefit obligations		2,226			1,435
Purchase accounting fair value adjustments		14,376			15,942
Net change in pension and other post-retirement benefits plans		3,249			2,811
Net operating loss carryforward		2,470			1,955
Net loss on cash flow hedges		-			524
Other		756			672
Total deferred tax assets		40,497			35,717
Deferred tax liabilities:
Pension and SERP expense		(4,715	)		(4,142	)
Depreciation		(1,537	)		(1,828	)
REIT undistributed net income		(86	)		(482	)
Net deferred loan costs and fees		(1,844	)		(1,416	)
Net gain on cash flow hedges		(341	)		-
State and local taxes		(1,862	)		(1,541	)
Other		(179	)		-
Total deferred tax liabilities		(10,564	)		(9,409	)
Net deferred tax asset	$	29,933		$	26,308

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of the State and City of New York and the State of New Jersey. The Company is no longer subject to examination by taxing authorities for years before 2013. There are no unrecorded tax benefits and the Company does not expect the total amount of unrecognized income tax benefits to significantly increase in the next twelve months.

Tax laws were enacted in 2014 and 2015 that changed the manner in which financial institutions and their affiliates are taxed in New York State and New York City, effective January 1, 2015. The initial impact of enactment of these tax law changes on the carrying amount of the Company’s deferred tax assets and liabilities was immaterial to the consolidated financial statements.

In connection with the acquisitions of HSB and FNBNY, the Company acquired net operating loss (“NOL”) carryfowards subject to Internal Revenue Code Section 382. The Company recorded a deferred tax asset that it expects to realize within the carryfoward period. At December 31, 2016, the remaining NOL carryforward was $4.0 million. In connection with the CNB acquisition, the Company acquired New York State and New York City net operating losses in the amount of $14.8 million and $6.2 million, respectively. The Company recorded a deferred tax asset that it expects to realize within the carryforward period.