Income Taxes

12 Months Ended

Dec. 31, 2021

Notes To Financial Statements

Income Taxes

11. Income Taxes

Flushing Financial Corporation files consolidated Federal and combined New York State and New York City income tax returns with its subsidiaries, with the exception of the trusts, which file separate Federal income tax returns as trusts, and FPFC, which files a separate Federal income tax return as a real estate investment trust. In 2021, FPFC was

dissolved and filed its final tax return. The Bank also files various other state tax returns. The Company is undergoing examinations of New York City income tax returns for years ending December 31, 2015 through 2017 and New York State income tax returns for years ending December 31, 2015 through 2019. Additionally, the Company remains subject to examination for its Federal and various other states income tax returns for the years ending on or after December 31, 2018. The Company believes it has accrued for all potential amounts that may be due to all taxing authorities.

Income tax provisions are summarized as follows for the years ended December 31:

	2021		2020		2019
	(In thousands)
Federal:
Current	$	21,206	$	14,178	$	12,404
Deferred		(1,128)		(4,990)		(1,965)
Total federal tax provision		20,078		9,188		10,439
State and Local:
Current		8,004		967		3,543
Deferred		(597)		353		(1,930)
Total state and local tax provision		7,407		1,320		1,613
Total provision for income taxes	$	27,485	$	10,508	$	12,052

The income tax provision in the Consolidated Statements of Income has been provided at effective rates of 25.2%, 23.3%, and 22.7 % for the years ended December 31, 2021, 2020, and 2019, respectively. The effective rates differ from the statutory federal income tax rate as follows for the years ended December 31:

	2021				2020				2019
	(Dollars in thousands)
Taxes at federal statutory rate	$	22,948	21.0	%	$	9,489	21.0	%	$	11,200	21.0	%
Increase (reduction) in taxes resulting from:
State and local income tax, net of Federal income tax benefit		6,865	6.3			1,043	2.3			1,274	2.4
Tax exempt		(1,150)	(1.0)			(875)	(1.9)			(878)	(1.6)
Nondeductible merger expense		—	—			543	1.2			328	0.6
Other		(1,178)	(1.1)			308	0.7			128	0.3
Taxes at effective rate	$	27,485	25.2	%	$	10,508	23.3	%	$	12,052	22.7	%

The components of the net deferred tax assets are as follows at December 31:

	2021		2020
	(In thousands)
Deferred tax assets:
Postretirement benefits	$	10,588	$	8,331
Allowance for credit losses		13,013		15,221
Operating lease liabilities		18,977		19,922
Stock based compensation		3,501		3,119
Depreciation		2,765		2,421
Unrealized loss on securities available for sale		2,917		—
Fair value adjustment on financial assets carried at fair value		16		23
Fair value hedges		394		2,988
Adjustment required to recognize funded status of postretirement pension plans		596		837
Cashflow hedges		653		7,780
Deferred loan income		2,200		2,192
Fair Value of Loans from Empire acquisition		2,820		3,798
Net operating loss (NYS)		—		29
Net operating loss (NYC)		684		1,896
Other		4,269		3,740
Deferred tax assets		63,393		72,297
Deferred tax liabilities:
FPFC deferred income		—		2,188
Right of Use Asset		17,570		17,080
Fair value adjustment on financial liabilities carried at fair value		754		4,968
Entity specific fair value		1,058		821
Unrealized gains on securities		—		573
Deferred loan cost		6,999		7,044
State and local taxes		3,016		3,768
Other		2,130		1,599
Deferred tax liabilities		31,527		38,041
Net deferred tax asset included in other assets	$	31,866	$	34,256

The deferred tax asset represents the anticipated net federal, state and local tax benefits expected to be realized in future years upon the utilization of the underlying tax attributes comprising this balance. The Company has reported taxable income for each of the past three years. In management’s opinion, in view of the Company’s previous, current and projected future earnings trend, the probability that some of the Company’s $31.5 million deferred tax liability can be used to offset a portion of the deferred tax asset it is more likely than not that the deferred tax asset will be fully realized. Accordingly, no valuation allowance was deemed necessary for the deferred tax asset at December 31, 2021 and 2020.

The Company does not have uncertain tax positions that are deemed material. The Company’s policy is to recognize interest and penalties on income taxes in tax expense. During the three years ended December 31, 2021, the Company did not recognize any material amounts of interest or penalties on income taxes.