INCOME TAXES

12 Months Ended

Dec. 31, 2024

INCOME TAXES

INCOME TAXES

15. INCOME TAXES

The Company’s consolidated Federal, State and City income tax provisions were comprised of the following:

	Year Ended December 31,
(In thousands)	2024		2023		2022
Current expense
Federal	$	20,170	$	24,469	$	39,492
State and city		8,479		15,681		17,205
Total current expense		28,649		40,150		56,697
Deferred expense
Federal		(5,179)		1,393		840
State and city		(1,115)		(758)		1,822
Total deferred expense		(6,294)		635		2,662
Total	$	22,355	$	40,785	$	59,359

The preceding table excludes tax effects recorded directly to stockholders’ equity in connection with unrealized gains and losses on securities available-for-sale (including losses on such securities upon their transfer to held-to-maturity), interest rate derivatives, and adjustments to other comprehensive income relating to the minimum pension liability, unrecognized gains of pension and other postretirement obligations and changes in the non-credit component of OTTI. These tax effects are disclosed as part of the presentation of the consolidated statements of changes in stockholders’ equity and comprehensive income.

The provision for income taxes differed from that computed at the Federal statutory rate as follows:

	Year Ended December 31,
(Dollars in thousands)	2024			2023			2022
Tax at federal statutory rate	$	10,802		$	28,745		$	44,502
State and local taxes, net of federal income tax benefit		5,583			12,237			13,699
Benefit plan differences		(131)			(127)			(127)
Investment in BOLI		(2,179)			(2,047)			(2,173)
Surrender of BOLI		7,415			—			—
Equity based compensation		200			79			(141)
Salaries deduction limitation		653			2,381			2,054
Other, net		12			(483)			1,545
Total	$	22,355		$	40,785		$	59,359
Effective tax rate		43.46	%		29.80	%		28.01	%

The increase in effective tax rate in 2024 was primarily the result of $9.1 million of income expense related to the taxable gain and Modified Endowment Contract Tax on the surrender of legacy BOLI assets. Deferred tax assets and liabilities are recorded for temporary differences between the book and tax bases of assets and liabilities. The components of Federal, State and City deferred income tax assets and liabilities were as follows:

	December 31,
(In thousands)	2024		2023
Deferred tax assets:
Allowance for credit losses and other contingent liabilities	$	29,013	$	26,926
Tax effect of other components of income on securities available-for-sale		14,251		34,745
Tax effect of other components of income on securities held-to-maturity		6,048		7,216
Operating lease liability		15,034		19,229
Other		3,546		2,603
Total deferred tax assets		67,892		90,719
Deferred tax liabilities:
Tax effect of other components of income on derivatives		3,261		2,368
Employee benefit plans		3,259		1,707
Tax effect of purchase accounting fair value adjustments		(201)		1,329
Difference in book and tax carrying value of fixed assets		670		2,230
Difference in book and tax basis of unearned loan fees		2,531		3,239
Operating lease asset		14,179		18,266
States taxes		—		2,166
Other		951		241
Total deferred tax liabilities		24,650		31,546
Net deferred tax asset (recorded in other assets)	$	43,242	$	59,173

The Company and its subsidiary are subject to U.S. federal income tax as well as income tax of the State of New York, City of New York and the State of New Jersey.

Under generally accepted accounting principles, the Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to be recovered or settled.

No valuation allowances were recognized on deferred tax assets during the years ended December 31, 2024 or 2023, since, at each period end, it was deemed more likely than not that the deferred tax assets would be fully realized.

In connection with the Merger, the Company acquired a federal net operating loss (“NOL”) carryforward subject to Internal Revenue Code Section 382. The Company recorded a deferred tax asset that it expects to realize within the carryforward period. At December 31, 2024, the remaining federal NOL carryforward was $2.0 million. At December 31, 2024, the Company had a New York State and New York City NOL carryforward balance of zero.

At December 31, 2024 and 2023, the Bank had accumulated bad debt reserves totaling $15.1 million for which no provision for income tax was required to be recorded. These bad debt reserves could be subject to recapture into taxable income

under certain circumstances, including a distribution of the bad debt benefits to the Holding Company or the failure of the Bank to qualify as a bank for federal income tax purposes. Should the reserves as of December 31, 2024 be fully recaptured, the Bank would recognize $4.8 million in additional income tax expense. The Company expects to take no action in the foreseeable future that would require the establishment of a tax liability associated with these bad debt reserves.

The Company is subject to regular examination by various tax authorities in jurisdictions in which it conducts significant business operations. The Company regularly assesses the likelihood of additional examinations in each of the tax jurisdictions resulting from ongoing assessments.

Under current accounting rules, all tax positions adopted are subjected to two levels of evaluation. Initially, a determination is made, based on the technical merits of the position, as to whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes. In conducting this evaluation, management is required to presume that the position will be examined by the appropriate taxing authority possessing full knowledge of all relevant information. The second level of evaluation is the measurement of a tax position that satisfies the more-likely-than-not recognition threshold. This measurement is performed in order to determine the amount of benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50% likely to be realized upon ultimate settlement. The Company had no unrecognized tax benefits as of December 31, 2024 or 2023. The Company does not anticipate any material change to unrecognized tax benefits during the year ended December 31, 2025.

As of December 31, 2024, the tax years ended December 31, 2024, 2023, 2022, and 2021, remained subject to examination by all of the Company's relevant tax jurisdictions. The Company is currently not under audit in any taxing jurisdictions.