Income Taxes

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Income Taxes

11. Income Taxes

The Company and its subsidiaries are subject to income tax within U.S. federal, New York, New York City, and various other state and local jurisdictions. 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, 2017 through 2019. The New York State examination of tax years 2015 through 2016 was closed in 2022, without material changes. 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, 2019.

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

	2022		2021		2020
	(In thousands)
Federal:
Current	$	17,565	$	21,206	$	14,178
Deferred		4		(1,128)		(4,990)
Total federal tax provision		17,569		20,078		9,188
State and Local:
Current		10,198		8,004		967
Deferred		140		(597)		353
Total state and local tax provision		10,338		7,407		1,320
Total provision for income taxes	$	27,907	$	27,485	$	10,508

The income tax provision in the Consolidated Statements of Income has been provided at effective rates of 26.6%, 25.2%, and 23.3% for the years ended December 31, 2022, 2021, and 2020, respectively. The effective rates differ from the statutory federal income tax rate as follows for the years ended December 31:

	2022				2021				2020
	(Dollars in thousands)
Taxes at federal statutory rate	$	22,019	21.0	%	$	22,948	21.0	%	$	9,489	21.0	%
Increase (reduction) in taxes resulting from:
State and local income tax, net of Federal income tax benefit		8,167	7.8			6,865	6.3			1,043	2.3
Tax exempt income, net		(2,083)	(2.0)			(1,150)	(1.0)			(875)	(1.9)
Nondeductible merger expense		—	—			—	—			543	1.2
Other		(196)	(0.2)			(1,178)	(1.1)			308	0.7
Taxes at effective rate	$	27,907	26.6	%	$	27,485	25.2	%	$	10,508	23.3	%

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

	2022		2021
	(In thousands)
Deferred tax assets:
Allowance for credit losses on loans	$	12,528	$	11,532
Net unrealized losses on securities available for sale*		28,418		2,917
Operating lease liabilities		14,289		16,817
Accrued compensation		8,709		9,620
Stock based compensation		3,171		3,103
Depreciation		2,462		2,160
Derivative adjustments		2,030		349
Pension and post-retirement benefits		2,126		2,184
Other allowances		1,185		643
Acquisition fair value marks		960		1,373
Net operating losses		257		810
Net unrealized losses on pension and post-retirement benefits*		124		596
Net unrealized losses on cash flow hedges*		-		653
Other		989		1,360
Deferred tax assets		77,248		54,117
Deferred tax liabilities:
Right of use assets		13,410		15,589
Net unrealized gains on cash flow hedges*		11,429		-
Deferred loan fees, net		3,930		4,253
Fair value adjustments		2,314		648
Net unrealized gains on entity specific fair value*		672		1,058
Other		24		703
Deferred tax liabilities		31,779		22,251
Net deferred tax asset included in other assets	$	45,469	$	31,866

*Represents the amount of deferred taxes recorded in accumulated other comprehensive loss.

At December 31, 2022, after considering all available positive and negative evidence, management concluded that a valuation allowance against deferred tax assets was not necessary because it is more likely than not that these tax benefits will be fully realized in future periods. While management continues to evaluate the need for a valuation allowance prospectively, it is not expected that a valuation allowance will be required based upon projected profitability.

At December 31, 2022 and 2021, the Company had no material unrecognized tax benefits or accrued interest and penalties recorded. The Company does not expect the total amount of unrecognized tax benefits to significantly increase within the next twelve months. The Company's policy is to recognize interest and penalties on income taxes in income tax expense.