v3.25.2
Income Taxes
 12 Months Ended
Jun. 30, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income taxes are as follows:
Years Ended June 30,
202520242023
(In Thousands)
Current income tax expense:
Federal$3,709 $4,352 $6,145 
State2,157 2,406 2,634 
5,866 6,758 8,779 
Deferred income tax expense:
Federal(156)4 1,902 
State(786)(871)887 
(942)(867)2,789 
Total income tax expense$4,924 $5,891 $11,568 
The following table presents a reconciliation between the reported income taxes for the periods presented and the income taxes which would be computed by applying the federal income tax rates applicable to those periods. The federal income tax rate of 21% was applicable for the years ended June 30, 2025, 2024 and 2023.
Years Ended June 30,
202520242023
(Dollars In Thousands)
Income (loss) before income taxes$30,999 $(80,776)$52,379 
Statutory federal tax rate21 %21 %21 %
Federal income tax expense at statutory rate$6,510 $(16,963)$11,000 
(Reduction) increases in income taxes resulting from:
Tax exempt interest(48)(68)(143)
State tax, net of federal tax effect1,083 1,213 2,781 
Incentive stock options compensation expense— 5 12 
Income from bank-owned life insurance(2,235)(1,902)(1,840)
Goodwill impairment— 18,935 — 
Surrender of bank-owned life insurance policies— 4,477 — 
Other items, net(386)194 (242)
Total income tax expense $4,924 $5,891 $11,568 
Effective income tax rate15.88 %(7.29)%22.09 %
The effective income tax rate represents total income tax expense divided by income before income taxes. Retained earnings at June 30, 2025, includes approximately $38.4 million of bad debt allowance, pursuant to the IRC, for which income taxes have not been provided. If such amount is used for purposes other than to absorb bad debts, including distributions in liquidation, it will be subject to income tax at the then current rate.
A tax position is recognized if it is more likely than not that the position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation process, if any. A tax position that meets the more likely than not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of
whether or not a tax position has met the more likely than not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment.
Realization of deferred tax assets is dependent upon the generation of future taxable income or the existence of sufficient taxable income within the carryover period. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. In assessing the need for a valuation allowance, management considers the scheduled reversal of the deferred tax liabilities, the level of historical taxable income, and the projected future taxable income over the periods in which the temporary differences comprising the deferred tax assets will be deductible. Based on its assessments as of June 30, 2025 and 2024, the Company determined it is more likely than not that all deferred tax assets will be realized.
The tax effects of existing temporary differences that give rise to deferred income tax assets and liabilities are as follows:
June 30,
20252024
(In Thousands)
Deferred income tax assets:
Purchase accounting$3,140 $3,543 
Accumulated other comprehensive income
Unrealized loss on securities available for sale32,542 37,683 
Allowance for credit losses13,161 12,786 
Benefit plans2,596 2,605 
Compensation1,268 1,303 
Stock-based compensation2,689 2,923 
Uncollected interest1,581 1,177 
Depreciation2,634 2,309 
Net operating loss carryover1,522 889 
Capital loss carryforward703 614 
Other items643 780 
62,479 66,612 
Deferred income tax liabilities:
Deferred loan fees and costs1,756 1,690 
Accumulated other comprehensive income
Derivatives2,844 12,085 
Defined benefit plans276 98 
Goodwill2,400 2,400 
7,276 16,273 
Net deferred income tax asset$55,203 $50,339 
The Company and its subsidiaries are subject to U.S. federal income tax, as well as income tax of the state of New Jersey and various other states. The Company is generally no longer subject to examination by federal, state and local taxing authorities for tax years prior to June 30, 2022.