INCOME TAXES

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The components of Income tax expense for continuing operations for the years ended December 31, 2020, 2019, and 2018 are as follows:

	Year Ended December 31,
	2020		2019		2018
	(In thousands)
Current expense:
Federal	$	10,468	$	8,592	$	20,165
State	8,861		8,576		12,152
Total current expense	19,329		17,168		32,317
Deferred expense (benefit):
Federal	(6,467)		5,033		2,857
State	(3,974)		390		2,363
Total deferred expense/(benefit)	(10,441)		5,423		5,220
Income tax expense	$	8,888	$	22,591	$	37,537

Income tax expense attributable to income from continuing operations differs from the amounts computed by applying the Federal statutory rate to pre-tax income from continuing operations. Reconciliations between the Federal statutory income tax rate of 21% to the effective income tax rate for the years ended December 31, 2020, 2019 and 2018 are as follows:

	Year Ended December 31,
	2020		2019		2018
Statutory Federal income tax rate	21.0	%	21.0	%	21.0	%
Increase/(decrease) resulting from:
State and local income tax, net of Federal tax benefit	7.1	%	6.9	%	9.6	%
Book versus tax difference	—	%	—	%	6.7	%
Tax-exempt interest, net	(11.0)	%	(5.6)	%	(4.8)	%
Tax credits	(9.5)	%	(4.1)	%	(2.9)	%
Investments in affordable housing projects	7.1	%	3.4	%	1.9	%
Noncontrolling interests	—	%	—	%	(0.5)	%
Other, net	1.7	%	0.3	%	0.4	%
Effective income tax rate	16.4	%	21.9	%	31.4	%

The components of gross deferred tax assets and gross deferred tax liabilities at December 31, 2020 and 2019 are as follows:

	December 31,
	2020		2019
	(In thousands)
Gross deferred tax assets:
Allowance for loan and OREO losses	$	26,444	$	21,789
Interest on nonaccrual loans	214		172
Stock compensation	1,324		1,710
Deferred and accrued compensation	13,010		13,096
Lease liabilities	32,068		34,129
PPP loan origination fees	1,692		—
Other	1,618		1,129
Total gross deferred tax assets	76,370		72,025
Gross deferred tax liabilities:
Goodwill and acquired intangible assets	14,579		13,333
Fixed assets	4,979		4,518
Right-of-use assets	30,673		32,454
Prepaid expenses	405		385
Loan servicing fees	545		—
Contingent payments	5,688		6,764
Unrealized gain on investments	12,441		2,949
Other	286		239
Total gross deferred tax liabilities	69,596		60,642
Net deferred tax assets	$	6,774	$	11,383

The Company's net deferred tax asset decreased $4.6 million during 2020. The decrease was due to the current year tax effect of other comprehensive income of $9.5 million and the tax effect of the adoption of ASU 2016-13 of $5.5 million, partially offset by the deferred tax benefit of $10.4 million.

In accordance with ASC 740, deferred tax assets are to be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of the tax benefit depends upon the existence of sufficient taxable income of the appropriate character within the carry-forward periods.

The Company believes the existing net deductible temporary differences that give rise to the net deferred tax assets will reverse in future periods when the Company expects to generate taxable income. Other positive evidence to support the realization of the Company’s net deferred tax assets includes:

•The Company had cumulative pre-tax income, as adjusted for permanent book-to-tax differences, in the period 2018 through 2020.

•Certain tax planning strategies are available to the Company, such as reducing investments in tax-exempt securities.

•The Company has not had any operating loss or tax credit carryovers expiring unused in recent years.

A reconciliation of the beginning and ending gross amount of unrecognized tax benefits under the provisions of ASC 740-10 is as follows:

	2020		2019		2018
	(In thousands)
Balance at January 1	$	909	$	935	$	1,025
Additions based on tax positions related to the current year	190		177		149
Additions based on tax positions taken in prior years	180		—		—
Decreases based on the expiration of statute of limitations	(213)		(203)		(239)
Balance at December 31	$	1,066	$	909	$	935

The Company does not currently believe there is a reasonable possibility of any significant change to unrecognized tax benefits within the next twelve months.

Excluded from the gross amount of unrecognized tax benefits for the years ended December 31, 2020, 2019, and 2018 are the federal tax benefits associated with the gross amount of state unrecognized tax benefits which, if recognized, would affect the effective tax rate. The net amount of unrecognized tax benefits is $0.9 million, $0.8 million, and $0.8 million at December 31, 2020, 2019, and 2018, respectively, which, if recognized would affect the effective tax rate.

The Company classifies interest and penalties, if applicable, related to unrecognized tax benefits as a component of Income tax expense in the Consolidated Statements of Operations. Interest and penalties recognized as part of the Company’s Income tax expense was immaterial for the years ending December 31, 2020, 2019, and 2018. The accrued amounts for interest and penalties were immaterial as of December 31, 2020, 2019, and 2018.

Federal, Florida, and Massachusetts income tax returns remain subject to examination for all tax years after December 31, 2016. California income tax returns remain subject to examination for all tax years after December 31, 2015. The examination by the State of New York for the tax years ended December 31, 2015, 2016, and 2017 was settled in December, 2020. The resolution of this examination did not have a significant impact on the effective tax rate. As of December 31, 2020, the Company was under examination by the City of New York for the tax years ended December 31, 2016, 2017, and 2018. The Company believes the resolution of this examination will not have a significant impact on the effective tax rate.