Dime Commercial Bancshares, Inc. /NY/ Income Taxes Disclosure

15. INCOME TAXES

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

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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.

In December 2023, the FASB issued ASU No. 2023-09—Income Taxes (Topic 740)—Improvements to Income Tax Disclosures, intended to enhance the transparency of income tax disclosures, primarily related to the rate reconciliation and income taxes paid information. ASU 2023-09 became effective for the Company on January 1, 2025 for annual reporting periods on a prospective basis.

The following table provides a reconciliation of the Income tax expense recognized in the Consolidated Statements of Operations to the amount computed by applying our statutory federal tax rate to pre-tax income.

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

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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:

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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, the State of New Jersey and the State of Florida. The Bank is subject to income tax in the state of Florida due to employees working remotely in the state.

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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.

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No valuation allowances were recognized on deferred tax assets during the years ended December 31, 2025 or 2024, since, at each period end, it was deemed more likely than not that the deferred tax assets would be fully realized.

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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, 2025, the remaining federal NOL carryforward was $1.8 million. At December 31, 2025, the Company had no New York State or New York City NOL carryforward.

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At December 31, 2025 and 2024, 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, 2025 be fully recaptured, the Bank would recognize $4.7 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.

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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.

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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. The Company recognizes only those tax positions that meet the more-likely-than-not recognition threshold, and establishes tax reserves for uncertain tax positions that do not meet this threshold. To the extent these unrecognized tax benefits are ultimately recognized, approximately $6.9 million will impact the Company's effective tax rate in future periods. Interest associated with income tax matters are included in the provision for income taxes. As of December 31, 2025, the Company had an uncertain tax position of $6.9 million and accrued interest of $1.9 million, totaling $8.8 million within Other liabilities on the Consolidated Statements of Financial Condition.

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A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

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The Company had no unrecognized tax benefits as of December 31, 2024 or 2023.

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As of December 31, 2025, the tax years ended December 31, 2024, 2023, and 2022, remained subject to examination by all of the Company's relevant tax jurisdictions.

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Income taxes paid, net of refunds received, by jurisdiction for the year ended December 31, 2025 were as follows:

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