Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The components of income taxes are as follows:

	Years Ended December 31,
(in thousands)	2020		2019		2018
Current tax provision	$	24,022	$	20,418	$	30,459
Deferred tax (benefit) expense	(6,763)		2,854		(13,571)
Total provision for income taxes	$	17,259	$	23,272	$	16,888

    In 2018, the State of New Jersey enacted changes to the tax law that included a corporate tax surcharge. The surcharge was 2.5% for 2018 and 2019, 1.5% for 2020 and 2021 and would revert to no surcharge in 2022; however, the State of New Jersey enacted further changes to the tax law increasing the surcharge to 2.5% until the end of 2023. The surcharge is scheduled to be eliminated in 2024. In addition to the surcharge, New Jersey adopted the concept of combined, or consolidated, tax filings under a unitary concept for corporations that are part of an affiliated group beginning in 2019. As of July 1, 2018, the Company revalued its deferred tax assets based on the additional surcharge and the combined tax filings. Based on this revaluation, the Company recorded an increase in its net deferred tax asset of $943,000 to reflect the change in the state tax rates among its subsidiaries.

    The income tax provision reconciled to the income taxes that would have been computed at the statutory federal rate of 21% as follows: 

	Years Ended December 31,
(in thousands)	2020		2019		2018
Federal income tax, at statutory rates	$	15,703	$	19,728	$	16,861
Increase (deduction) in taxes resulting from:
Tax-exempt income	(961)		(952)		(1,096)
State income tax, net of federal income tax effect	2,178		4,322		1,880
Adjustment to net deferred tax asset for change in NJ tax law	—		—		(943)
Excess tax expense (benefits) from employee share-based payments	132		(189)		(318)
Other, net	207		363		504
Provision for income taxes	$	17,259	$	23,272	$	16,888

The net deferred tax asset consisted of the following:

	December 31,
(in thousands)	2020		2019
Deferred tax assets:
Allowance for credit losses/Allowance for loan losses	$	21,300	$	11,937
Stock based compensation plans	985		958
Purchase accounting fair market value adjustments	2,174		3,632
Non-accrued interest	664		381
Deferred compensation	2,570		2,444
Loss on equity securities	50		—
Other-than-temporary impairment loss on investment securities	—		41
Federal net operating loss carryforward	875		875
Unrealized loss on pension plans	13		2
Unrealized loss on derivatives	42		—
Other, net	508		594
Gross deferred tax assets	29,181		20,864
Deferred tax liabilities:
Core deposit intangible from acquired companies	852		1,235
Undistributed income from subsidiary not consolidated for tax return purposes (REIT)	852		678
Deferred loan costs	1,822		1,461
Depreciation and amortization	793		750
Prepaid expenses	578		443
Deferred gain on securities	—		162
Loss on equity securities	—		65
Unrealized gain on investment securities	4,746		884
Unrealized gains on hedging derivative	—		80
Other	260		301
Gross deferred tax liabilities	9,903		6,059
Net deferred tax assets	$	19,278	$	14,805

Upon the adoption of ASU 2016-13 in 2020, the Company recorded a net deferred tax asset of $1.4 million. The Company recorded net deferred tax assets of $4.3 million as a result of the acquisition of Highlands Bancorp, Inc. in 2019.

The Company evaluates the realizability of its deferred tax assets by examining its earnings history and projected future earnings and by assessing whether it is more likely than not that carryforwards would not be realized. Based upon the majority of the Company’s deferred tax assets having no expiration date, the Company’s earnings history, and the projections of future earnings, the Company’s management believes that it is more likely than not that all of the Company’s deferred tax assets as of December 31, 2020 will be realized.

The Company evaluates tax positions that may be uncertain using a recognition threshold of more likely than not, and a measurement attribute for all tax positions taken or expected to be taken on a tax return, in order for those tax positions to be recognized in the financial statements. The Company had no unrecognized tax benefits or related interest or penalties at December 31, 2020 or 2019.

The Company is subject to U.S. federal income tax law as well as income tax of various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few significant exceptions, the Company is no longer subject to U.S. federal examinations by tax authorities for the years before 2017 or to state and local examinations by tax authorities for the years before 2017.