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INCOME TAXES
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Income tax expense for the years ended December 31, 2023 and 2022, consists of the following:
CurrentDeferredTotal
(In thousands)
December 31, 2023
Federal$— $— $— 
State— — — 
$— $— $— 
December 31, 2022
Federal$299 $— $299 
State39 — 39 
$338 $— $338 
A reconciliation between the actual income tax expense and the expected federal income tax expense (computed by multiplying income before income tax expense times the applicable statutory federal income tax rate) for the years ended December 31, 2023 and 2022, is as follows:
20232022
(In thousands)
Income (loss) before income tax expense (benefit)$(7,397)$2,734 
Applicable statutory federal income tax rate21.00 %21.00 %
Computed “expected” federal income tax expense (benefit)$(1,553)$574 
Increase (decrease) in federal income tax expense resulting from:
State income taxes, net of federal benefit(487)244 
Valuation allowance2,016 (414)
Tax-exempt income(90)(96)
Bank owned life insurance(98)(103)
Non-deductible compensation54 27 
ESOP fair market value adjustment(4)50 
Stock compensation150 54 
Other items, net12 2 
Total$— $338 
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:
December 31, 2023December 31, 2022
Deferred tax assets:(In thousands)
Allowance for credit losses on loans and REO$4,064 $4,242 
Allowance for losses held-to-maturity securities38 — 
Net unrealized losses on securities available-for-sale8,087 9,529 
Accrued postretirement benefits1,173 1,195 
Accrued interest receivable144 187 
Accrued bonus244 730 
Stock compensation602 150 
Premises and equipment184 109 
Finance lease liability7,527 7,681 
Charitable contribution carryover2,533 2,729 
Federal net operating loss carryforward 6,935 5,417 
State net operating loss carryforward2,345 1,879 
Other61 — 
Total gross deferred tax assets33,937 33,848 
Valuation allowance(24,105)(22,570)
Gross deferred tax assets after valuation allowance9,832 11,278 
Deferred tax liabilities:
Net unrealized gains on derivatives2,131 3,118 
Deferred loan fees, net559 772 
Unrealized actuarial gains on post retirement benefits66 105 
Finance lease right-of-use asset7,076 7,282 
Other— 1 
Total gross deferred tax liabilities9,832 11,278 
Net deferred tax asset$— $— 
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2023. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.
On the basis of this evaluation, for the year ended December 31, 2023, a valuation allowance of $24.1 million has been maintained. The amount of the deferred tax asset considered realizable could be adjusted if estimates of future taxable income increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth. Net deferred tax assets are included in other assets.
At December 31, 2023, the Company had federal net operating loss (“NOL”) carryforwards of $33.0 million with no expiration date. Under the provisions of the 2017 Tax Cuts and Jobs Act, use of our federal NOL carryforwards will be limited to 80% of taxable income in future periods. The Company also had New Jersey net operating loss carryforwards of $33.0 million, the majority of which expire in 18 years. We believe it is more likely than not the benefit from both the federal and state NOL carryforwards will not be realized. As such, we have provided a valuation allowance of $9.3 million on the deferred tax assets related to the NOL carryforwards. The Company contributed $9.0 million to the Blue Foundry Charitable Foundation in 2021 and the deferred benefit has a five year carryforward limitation.
Retained earnings at December 31, 2023 and 2022, includes approximately $14.6 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.
The Company and its subsidiary are subject to U.S. federal income tax as well as state income taxes, primarily New Jersey. The Company is no longer subject to examination by Federal taxing authorities for tax years before January 1, 2020, and State taxing authorities for tax years before January 1, 2019. Currently, the Company is not under examination by any taxing authority. The Company's New Jersey state tax returns for the tax years ended December 31, 2015 through 2018 were audited during 2021. The completion of this examination did not have a material impact on the Company's effective tax rates and financials.
On August 16, 2022, the Inflation Reduction Act of 2022 was signed into legislation. The Act includes provisions that extend the expanded Affordable Care Act health plan premium assistance program through 2025, impose an excise tax on stock buybacks, increase funding for IRS tax enforcement, expand energy incentives, and impose a corporate minimum tax. The Company has evaluated such provisions and determined that the impact of the Inflation Reduction Act of 2022 on the income tax provision and deferred tax assets of December 31, 2023 was not material.