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INCOME TAXES
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
 
Provision for Income Taxes
The components of the Company’s provision for income taxes for the years ended December 31, 2023, 2022, and 2021 were, as follows: 
(In thousands)202320222021
Current:   
Federal tax expense$5,596 $17,915 $17,340 
State tax expense7,497 6,831 7,580 
Total current tax expense (1)
13,093 24,746 24,920 
Deferred:   
Federal tax (benefit)/expense(2,658)(2,274)5,125 
State tax (benefit)/expense(1,711)(1,187)112 
Total deferred tax (benefit)/expense(4,369)(3,461)5,237 
Change in valuation allowance— — 200 
Income tax expense$8,724 $21,285 $30,357 
(1)    The Company recorded an additional $500 thousand benefit in 2021 resulting from the carryback of its 2020 NOL to recover federal income taxes paid in 2015 through 2018 (at a 35% federal income tax rate for years 2015 through 2017).

Effective Tax Rate
The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the years ended December 31, 2023, 2022, and 2021: 
 202320222021
(In thousands, except rates)AmountRateAmountRateAmountRate
Statutory tax rate$16,448 21.0 %$23,902 21.0 %$31,294 21.0 %
Increase (decrease) resulting from:      
State taxes, net of federal tax benefit4,570 5.8 4,459 3.9 6,077 4.1 
Tax exempt income - investments, net(3,611)(4.6)(3,515)(3.1)(3,475)(2.3)
Bank-owned life insurance(1,568)(2.0)(1,258)(1.1)(1,348)(0.9)
Tax credits, net of basis reduction(7,804)(10.0)(2,129)(1.9)(2,881)(1.9)
Change in valuation allowance— — — — 200 0.1 
Tax rate benefit on net operating loss carryback— — — — (493)(0.3)
Other, net689 0.9 (174)(0.1)983 0.6 
Effective tax rate$8,724 11.1 %$21,285 18.7 %$30,357 20.4 %
    
Deferred Tax Assets and Liabilities
As of December 31, 2023 and 2022, significant components of the Company’s deferred tax assets and liabilities were, as follows:
(In thousands)20232022
Deferred tax assets:  
Allowance for credit losses$31,181 $28,312 
Unrealized capital loss on tax credit investments2,688 1,603 
Net unrealized loss on securities available for sale, swaps, and pension in OCI50,704 63,335 
Employee benefit plans12,102 11,659 
Purchase accounting adjustments4,587 4,342 
Net operating loss carryforwards202 503 
Deferred loan fees5,654 4,049 
Lease liability13,583 14,148 
Premises and equipment1,188 2,630 
Nonaccrual interest890 1,069 
Intangible amortization1,020 659 
Other2,337 1,778 
Deferred tax assets, net before valuation allowances126,136 134,087 
Valuation allowance(400)(400)
Deferred tax assets, net of valuation allowances$125,736 $133,687 
Deferred tax liabilities:  
Loan servicing rights$(1,133)$(1,212)
Unamortized tax credit reserve(1,661)(1,687)
Right-of-use asset(12,874)(12,457)
Deferred tax liabilities$(15,668)$(15,356)
Deferred tax assets, net $110,068 $118,331 
 
The Company’s net deferred tax asset decreased by $8.3 million during 2023 and $12.6 million of this change is related to unrealized losses in OCI.
 
Deferred tax assets, net of valuation allowances, are expected to be realized through the reversal of existing taxable temporary differences and future taxable income.

Valuation Allowances
The components of the Company’s valuation allowance on its deferred tax asset, net as of December 31, 2023 and 2022 were, as follows: 
(in thousands)20232022
State valuation allowances$(400)$(400)

The state tax valuation allowance, net of Federal benefit, was originally recorded in 2012, due to management's assessment that it is more likely than not that certain deferred tax assets recorded for the difference between the book basis and the state tax basis in certain tax credit limited partnership investments (LPs) will not be realized. Management anticipates that the remaining excess state tax basis realized upon termination of these partnerships will be a capital loss upon disposition, and that capital loss may not be deductible in some of the Company's state tax jurisdictions.

The valuation allowance as of December 31, 2023 is subject to change in the future as the Company continues to periodically assess the likelihood of realizing its deferred tax assets.
Tax Attributes
At December 31, 2023, the Company has $491 thousand of federal net operating loss carryforwards, the utilization of which are limited under Internal Revenue Code Section 382. These net operating losses begin to expire in 2029. The related deferred tax asset is $103 thousand.

State net operating loss carryforwards, net of valuation allowance described above, are expected to be utilized in the future and begin to expire in 2023. The related gross deferred tax asset is $99 thousand.

Unrecognized Tax Benefits
On a periodic basis, the Company evaluates its income tax positions based on tax laws and regulations and financial reporting considerations, and records adjustments as appropriate. This evaluation takes into consideration the status of taxing authorities’ current examinations of the Company’s tax returns, recent positions taken by the taxing authorities on similar transactions, if any, and the overall tax environment in relation to uncertain tax positions.

The following table presents changes in unrecognized tax benefits for the years ended December 31, 2023, 2022, and 2021:
(In thousands)202320222021
Unrecognized tax benefits at January 1$1,042 $1,025 $516 
Increase in gross amounts of tax positions related to prior years782 17 509 
Decrease in gross amounts of tax positions related to prior years— — — 
Decrease due to settlement with taxing authority— — — 
Decrease due to lapse in statute of limitations— — — 
Unrecognized tax benefits at December 31$1,824 $1,042 $1,025 

It is reasonably possible that over the next twelve months the amount of unrecognized tax benefits may change from the reevaluation of uncertain tax positions arising in examinations, in appeals, or in the courts, or from the closure of tax statutes. The Company does not expect any significant changes in unrecognized tax benefits during the next twelve months.

All of the Company’s unrecognized tax benefits, if recognized, would be recorded as a component of income tax expense, therefore, affecting the effective tax rate. The Company recognizes interest and penalties, if any, related to the liability for uncertain tax positions as a component of income tax expense. The accrual for interest and penalties was not material for all years presented.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction as well as in various states. In the normal course of business, the Company is subject to U.S. federal, state, and local income tax examinations by tax authorities. Other than open statutes of limitation pertaining specifically to the amended returns filed for 2015 through 2018 to claim 2020 NOL carryback refunds, the Company is no longer subject to examination for tax years prior to 2020 including any related income tax filings from its recent acquisitions. The Company has been selected for an income tax audit in the state of Connecticut for tax years 2019, 2020, and 2021, as well as an income tax audit in the state of Wisconsin for tax years 2018, 2019, and 2020