Income Taxes

12 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 16 – Income Taxes

The components of income taxes are as follows:

	Years Ended June 30,
	2022		2021			2020
	(In Thousands)
Current income tax expense:
Federal	$	12,720	$	12,051		$	6,745
State		7,057		5,058			4,877
		19,777		17,109			11,622
Deferred income tax expense:
Federal		2,895		2,673			1,153
State		2,128		2,016			235
		5,023		4,689			1,388
Valuation allowance		-		(535	)		(723	)
Total income tax expense	$	24,800	$	21,263		$	12,287

Note 16 – Income Taxes (continued)

The following table presents a reconciliation between the reported income taxes for the periods presented and the income taxes which would be computed by applying the federal income tax rates applicable to those periods. The federal income tax rate of 21% was applicable for the years ended June 30, 2022, 2021 and 2020.

	Years Ended June 30,
	2022			2021			2020
	(Dollars In Thousands)
Income before income taxes	$	92,347		$	84,496		$	57,252
Statutory federal tax rate		21	%		21	%		21	%
Federal income tax expense at statutory rate	$	19,393		$	17,744		$	12,023
(Reduction) increases in income taxes resulting from:
Tax exempt interest		(266	)		(345	)		(497	)
State tax, net of federal tax effect		7,257			5,464			3,914
Incentive stock options compensation expense		45			85			78
Income from bank-owned life insurance		(1,281	)		(1,255	)		(1,314	)
Disqualifying disposition on incentive stock options		-			(33	)		-
Non-deductible merger-related expenses		-			49			148
Bargain purchase gain		-			(641	)		-
Tax benefit arising from the adoption of the CARES   Act provisions		-			-			(1,624	)
Other items, net		(348	)		730			282
		24,800			21,798			13,010
Valuation allowance		-			(535	)		(723	)
Total income tax expense	$	24,800		$	21,263		$	12,287
Effective income tax rate		26.86	%		25.16	%		21.46	%

The effective income tax rate represents total income tax expense divided by income before income taxes. Retained earnings at June 30, 2022, includes approximately $38.4 million of bad debt allowance, pursuant to the IRC, for which income taxes have not been provided. If such amount is used for purposes other than to absorb bad debts, including distributions in liquidation, it will be subject to income tax at the then current rate.

A tax position is recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation process, if any. A tax position that meets the more likely than not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more likely than not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment.

Realization of deferred tax assets is dependent upon the generation of future taxable income or the existence of sufficient taxable income within the carryover period. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. In assessing the need for a valuation allowance, management considers the scheduled reversal of the deferred tax liabilities, the level of historical taxable income, and the projected future taxable income over the periods in which the temporary differences comprising the deferred tax assets will be deductible. Based on its assessment, management determined the following related to June 30, 2022 and 2021:

During the year ended June 30, 2021, the Company reversed a valuation allowance totaling $535,000 which was associated with the realization of a capital loss carryforward.

It is more likely than not that all other deferred tax assets will be realized.

Note 16 – Income Taxes (continued)

The tax effects of existing temporary differences that give rise to deferred income tax assets and liabilities are as follows:

	June 30,
	2022		2021
	(In Thousands)
Deferred income tax assets:
Purchase accounting	$	6,327	$	8,417
Accumulated other comprehensive income
Defined benefit plans		26		326
Derivatives		-		94
Unrealized loss on securities available for sale		34,104		-
Allowance for credit losses		13,809		17,376
Benefit plans		2,494		2,432
Compensation		2,023		1,616
Stock-based compensation		2,834		2,937
Uncollected interest		1,705		1,484
Depreciation		1,931		1,691
Net operating loss carryover		4		5
Capital loss carryforward		141		313
Other items		844		1,048
		66,242		37,739
Valuation allowance		-		-
		66,242		37,739
Deferred income tax liabilities:
Deferred loan fees and costs		838		620
Accumulated other comprehensive income
Derivatives		11,542		-
Unrealized gain on securities available for sale		-		2,882
Goodwill		4,510		4,560
Other items		2		354
		16,892		8,416
Net deferred income tax asset	$	49,350	$	29,323

The Company has various state and local NOL carryforwards which will begin to expire in the year ending June 30, 2025.

The Company and its subsidiaries are subject to U.S. federal income tax, as well as income tax of the state of New Jersey and various other states. The Company is generally no longer subject to examination by federal, state and local taxing authorities for tax years prior to June 30, 2019.