| INCOME TAXES |
NOTE 9 — INCOME TAXES Income tax expense consisted of the following (in thousands): | | | | | | | | | Year Ended December 31, | | | 2021 | | 2020 | Current | | | | | | | Federal | | $ | 16,883 | | $ | 10,936 | State and local | | | 12,252 | | | 7,226 | Total current | | | 29,135 | | | 18,162 | Deferred | | | | | | | Federal | | | (405) | | | 139 | State and local | | | 285 | | | 151 | Total deferred | | | (120) | | | 290 | Total income tax expense | | $ | 29,015 | | $ | 18,452 |
Deferred tax assets and liabilities consist of the following (in thousands): | | | | | | | | | At December 31, | | | 2021 | | 2020 | Deferred tax assets: | | | | | | | Allowance for loan losses | | $ | 10,670 | | $ | 11,145 | Net unrealized loss on securities available for sale | | | 3,731 | | | — | Interest on nonaccrual loans | | | — | | | — | Off balance sheet reserves | | | 55 | | | 57 | Restricted stock | | | 252 | | | 90 | Tangible asset | | | 10 | | | 14 | Non-qualified stock options | | | 286 | | | 292 | Net unrealized loss on interest rate cap | | | — | | | 564 | Total gross deferred tax assets | | | 15,004 | | | 12,162 | Deferred tax liabilities: | | | | | | | Depreciation and amortization | | | 3,229 | | | 3,731 | Net unrealized gain on interest rate cap | | | 334 | | | — | Net unrealized gain on securities available for sale | | | — | | | 1,067 | Pass-through income | | | — | | | 59 | Prepaid assets | | | 459 | | | 355 | Other | | | 12 | | | — | Total gross deferred tax liabilities | | | 4,034 | | | 5,212 | Net deferred tax asset, included in other assets | | $ | 10,970 | | $ | 6,950 |
The following is a reconciliation of the Company’s statutory federal income tax rate to its effective tax rate (in thousands): | | | | | | | | | | | | | | | For the year ended December 31, | | | 2021 | | 2020 | | | Tax expense/ | | | | | Tax expense/ | | | | | | (benefit) | | Rate | | | (benefit) | | Rate | | Pretax income at statutory rates | | $ | 18,810 | | 21.00 | % | | $ | 12,163 | | 21.00 | % | State and local taxes, net of federal income tax benefit | | | 9,904 | | 11.06 | | | | 5,828 | | 10.06 | | Nondeductible expenses | | | 680 | | 0.76 | | | | 457 | | 0.79 | | Excess tax deduction on equity awards | | | (467) | | (0.52) | | | | (59) | | (0.10) | | Tax-exempt income, net | | | (51) | | (0.06) | | | | — | | — | | Other | | | 139 | | 0.15 | | | | 63 | | 0.11 | | Effective income tax expense/rate | | $ | 29,015 | | 32.39 | % | | $ | 18,452 | | 31.86 | % |
The Company and the Bank filed consolidated Federal, New York State, Connecticut and New York City tax returns in 2021 and 2020. The Bank filed separate state tax returns with Missouri and Kentucky in 2021 and 2020. As of December 31, 2021 and 2020, there are no unrecognized tax benefits, and the Company does not expect this to significantly change in the next twelve months. Except for New York City and Kentucky, the Company is no longer subject to examination by the U.S. federal and state or local tax authorities for years prior to 2018. Kentucky is no longer subject to examination for years prior to 2017. As of December 31, 2021, the Company was under audit in New York for the 2018 tax year, and in New York City for the 2017 and 2018 tax years. Due to the New York City audit, the 2017 tax year New York City statute of limitation has been extended to December 31, 2022.
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