Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income tax expense for the years ended December 31, 2023, 2022, and 2021 are as follows:

	Years Ended December 31,
	2023		2022		2021
	(In thousands)
Current:
Federal	$	3,488	$	13,253	$	12,443
State	3,102		4,681		3,980
Total current	6,590		17,934		16,423
Deferred:
Federal	6,615		9,222		12,594
State	(3,240)		3,547		5,115
Total deferred	3,375		12,769		17,709
Total income tax expense	$	9,965	$	30,703	$	34,132

The Company reported deferred tax (benefit) expense of $(11.5) million, $53.4 million, and $8.0 million for the years ended December 31, 2023, 2022, and 2021, respectively, related to the unrealized gains (losses) on securities available for sale, which is reported in accumulated other comprehensive income (loss), net of tax. Additionally, the Company recorded a deferred tax (benefit) expense of $218,000, $749,000, and $1.1 million, respectively, related to the reclassification adjustment of actuarial net (loss) gain on employee benefit obligations, which is reported in accumulated other comprehensive income, net of tax. Deferred tax assets and/or liabilities for the years ended December 31, 2022 and 2021, also includes $9.6 million, and $1.5 million respectively, recorded as a result of purchase accounting related to the RSI and Freehold acquisitions, respectively. Deferred tax assets for the year ended December 31, 2022 also includes $2.4 million related to the adoption of CECL on January 1, 2022.

A reconciliation between the amount of reported total income tax expense and the amount computed by multiplying the applicable statutory federal income tax rate of 21% is as follows:

	Years Ended December 31,
	2023		2022		2021
	(In thousands)
Tax expense at applicable statutory rate	$	9,670	$	24,544	$	26,498
Increase (decrease) in taxes resulting from:
State tax, net of federal income tax benefit	(103)		6,449		7,185
ESOP fair market value adjustment	383		540		375
Tax exempt interest income	(22)		(31)		(15)
162(m)	549		—		—
Income from Bank-owned life insurance	(1,865)		(1,179)		(863)
Dividend received deduction	—		(10)		(14)
Non-deductible merger-related expenses	—		40		53
Expired charitable contributions carryforward	1,368		—		—
Other, net	(15)		350		913
Total income tax expense	$	9,965	$	30,703	$	34,132

(15)    Income Taxes (continued)

The net deferred tax asset/liability is included in other assets/liabilities in the Consolidated Statements of Financial Condition. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2023 and 2022 are as follows:

	At December 31,
	2023		2022
	(In thousands)
Deferred tax assets:
Allowance for credit losses	$	15,507	$	14,990
Post-retirement benefits	6,602		6,002
Deferred compensation	2,122		3,619
Retirement Income Maintenance plan	3,222		3,062
ESOP	1,131		990
Stock-based compensation	2,968		2,386
Reserve for uncollected interest	213		35
Net unrealized losses on debt securities and defined benefit plans	62,070		70,060
Federal and State NOLs	14,607		13,333
Alternative minimum assessment carryforwards	2,156		2,156
Charitable contribution carryforward	—		3,514
Purchase accounting	1,428		2,805
Lease liability	4,654		5,264
Other items	4,744		7,002
Gross deferred tax assets	121,424		135,218
Valuation allowance	(26)		(1,965)
	121,398		133,253
Deferred tax liabilities:
Pension expense	72,307		68,825
Depreciation	2,996		5,945
Deferred loan costs	14,006		14,724
Intangible assets	1,609		1,616
Lease right-of-use asset	4,371		4,958
Other items	618		286
Total gross deferred tax liabilities	95,907		96,354
Net deferred tax asset (liability)	$	25,491	$	36,899

Retained earnings at December 31, 2023 and 2022 includes approximately $21.5 million for which no provision for income tax has been made. This amount represents an allocation of income to bad debt deductions for tax purposes only. Events that would result in taxation of these reserves include the failure to qualify as a bank for tax purposes, distributions in complete or partial liquidation, stock redemptions and excess distributions to stockholders.

(15)    Income Taxes (continued)

Management believes that not all existing net deductible temporary differences that comprise the net deferred tax asset will reverse during periods in which the Company generates sufficient net taxable income. Accordingly, management has established a valuation allowance. Significant changes in the Company's operations and or economic conditions could affect the benefits of the recognized net deferred tax assets.

Management believes, based on current facts, that it is more likely than not that there will be sufficient taxable income in future years to realize federal deferred tax assets. Historically, the Company believed that it was more likely than not that the benefits from certain New Jersey net operating loss carryforwards and tax credits would not be realized, and therefore, a valuation allowance was established for the portion of the state tax benefit that would not be realized. On July 3, 2023, the State of New Jersey enacted comprehensive tax legislation which changed net operating loss conversion carryovers, allowing members of a unitary group to utilize pre-conversion state net operating losses. As a result of this legislation, management believes substantially all New Jersey net operating losses will be available to offset future taxable income, and therefore, the Company reduced its valuation allowance related to these state attributes during the year ended December 31, 2023. At December 31, 2023 and 2022, the Company's valuation allowance totaled $26,000 and $2.0 million, respectively. Based upon projections of future taxable income, management believes it is more likely than not the Company will realize the remaining deferred tax assets.

The Company had federal net operating losses from the acquisition of Roselle of approximately $5.6 million and $7.8 million at December 31, 2023 and 2022, respectively. Roselle net operating losses are subject to a 20 year carryforward. The Company also had federal net operating losses from the acquisition of RSI of approximately $5.2 million and $8.6 million at December 31, 2023 and 2022, respectively. RSI net operating losses have an indefinite carryover subject to an 80% taxable income utilization and are subject to an annual limitation under Code Section 382. The Roselle net operating losses are subject to an annual limitation under Code Section 382 and will begin to expire in 2036 if not used.

The Company had New Jersey net operating loss carryforwards of $186.0 million and $147.0 million, respectively, at December 31, 2023 and 2022. If not utilized, these carryforwards will expire periodically through 2042. At both December 31, 2023 and 2022, the Company had approximately $2.2 million of New Jersey AMA Tax Credits. These credits do not expire.

The Company files income tax returns in the United States federal jurisdiction and in the states of New Jersey, New York, and Pennsylvania. At December 31, 2023, the Company is no longer subject to federal income tax examination for the years prior to 2020. Columbia Bank MHC and its subsidiaries' New York City returns are currently under audit for the tax years 2016 and 2017. The Company is open for examination by the State of New Jersey for years after 2019 and by the State of Pennsylvania for years after 2020.