PROVIDENT FINANCIAL SERVICES INCPFS
PROVIDENT FINANCIAL SERVICES INC Income Taxes Disclosure
Income Taxes
The current and deferred amounts of income tax expense (benefit) for the years ended December 31, 2025, 2024 and 2023 are as follows (in thousands):
| Years ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 54,892 | 30,510 | 31,972 | |||||||||||||
| State | 37,644 | 15,851 | 12,684 | ||||||||||||||
| Total current income tax expense | 92,536 | 46,361 | 44,656 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 15,075 | (1,406) | 905 | ||||||||||||||
| State | 9,386 | (10,865) | 1,820 | ||||||||||||||
| Total deferred income tax expense | 24,461 | (12,271) | 2,725 | ||||||||||||||
| Total income tax expense | $ | 116,997 | 34,090 | 47,381 | |||||||||||||
The Company recorded a deferred tax expense (benefit) of $37.3 million, ($5.0) million and $11.1 million during 2025, 2024 and 2023, respectively, related to the unrealized gains (losses) on available for sale debt securities, which is reported in accumulated other comprehensive income (loss), net of tax. The Company recorded a deferred tax (benefit) expense of ($2.5) million, ($2.0) million and ($3.9) million in 2025, 2024 and 2023, respectively, related to the unrealized gains (losses) on cash flow hedge advances, which is reported in accumulated other comprehensive income (losses), net of tax. Also, the Company recorded a deferred tax (benefit) expense of ($1.1) million, $1.1 million and $884,000 in 2025, 2024 and 2023, respectively, related to the amortization of post-retirement benefit obligations, which is reported in accumulated other comprehensive income (loss), net of tax.
A reconciliation between the amount of reported total income tax expense and the amount computed by multiplying the applicable statutory income tax rate is as follows for the year ended December 31, 2025 (in thousands):
| Years ended December 31, | ||||||||
| 2025 | % | |||||||
| Tax expense at statutory rates | $ | 85,713 | 21.00 | % | ||||
| Increase (decrease) in taxes resulting from: | ||||||||
State tax, net of federal income tax benefit (1) | 37,153 | 9.10 | ||||||
| Rate Change | — | — | ||||||
| Tax-exempt interest income, net | (2,760) | (0.68) | ||||||
| Bank-owned life insurance | (2,127) | (0.52) | ||||||
| Renewable energy tax credits, net | (3,380) | (0.83) | ||||||
| Other, net | 2,398 | 0.59 | ||||||
| Total income tax expense | $ | 116,997 | 28.66 | % | ||||
(1) State and local income taxes in New Jersey comprise the majority of the domestic state and local income taxes, net of federal effect category.
Additionally, a reconciliation between the amount of reported total income tax expense and the amount computed by multiplying the applicable statutory income tax rate is as follows for the years ended December 31, 2024 and 2023 (in thousands):
| 2024 | 2023 | ||||||||||
| Tax expense at statutory rates | $ | 31,419 | 36,932 | ||||||||
| Increase (decrease) in taxes resulting from: | |||||||||||
| State tax, net of Federal income tax benefit | 11,027 | 11,313 | |||||||||
| Rate Change | (7,008) | — | |||||||||
| Tax-exempt interest income | (2,861) | (2,514) | |||||||||
| Bank-owned life insurance | (2,459) | (1,361) | |||||||||
| Other, net | 3,972 | 3,011 | |||||||||
| Total income tax expense | $ | 34,090 | 47,381 | ||||||||
The net deferred tax asset is included in other assets in the Consolidated Statements of Financial Condition. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2025 and 2024 are as follows (in thousands):
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Allowance for credit losses on loans | $ | 51,650 | 54,931 | ||||||||
| Allowance for credit loss on off-balance sheet ("OBS") credit exposure | 1,915 | 1,998 | |||||||||
| Post-retirement benefit | 4,534 | 5,485 | |||||||||
| Deferred compensation | 3,420 | 2,926 | |||||||||
| Purchase accounting adjustments | 54,228 | 105,950 | |||||||||
| Depreciation | 5,661 | 4,836 | |||||||||
| SERP | 1,146 | 1,991 | |||||||||
| Accrued Bonus | 5,569 | — | |||||||||
| Stock-based compensation | 3,143 | 3,694 | |||||||||
| Non-accrual interest | 674 | 807 | |||||||||
| State Net Operating Loss ("NOL") | 9,018 | 2,268 | |||||||||
| Federal NOL | 15,855 | 1,389 | |||||||||
| Capital Loss Carryforward | 600 | — | |||||||||
| Unrealized losses on available for sale debt securities | 28,531 | 66,646 | |||||||||
| Net unrealized loss on hedging activities | 625 | — | |||||||||
| Lease liability | 17,086 | 18,489 | |||||||||
| Other | 4,678 | 4,666 | |||||||||
| Total gross deferred tax assets | 208,333 | 276,076 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Pension expense | 10,608 | 10,161 | |||||||||
| Contingent consideration | 560 | 436 | |||||||||
| Deferred loan costs | 11,651 | 17,668 | |||||||||
| Investment securities, principally due to accretion of discounts | 101 | 71 | |||||||||
| Intangibles | 2,479 | 2,151 | |||||||||
| Originated mortgage servicing rights | 111 | 129 | |||||||||
| Pension liability adjustments | 1,191 | 2,546 | |||||||||
| Net unrealized gain on hedging activities | — | 1,641 | |||||||||
| Lease right-of-use asset | 16,196 | 17,648 | |||||||||
| Total gross deferred tax liabilities | 42,897 | 52,451 | |||||||||
| Net deferred tax asset | $ | 165,436 | 223,625 | ||||||||
The components of income taxes paid (net of refunds) disaggregated by federal and state as of December 31, 2025 are as follows (in thousands):
| Years ended December 31, | |||||
| 2025 | |||||
US federal (1) | $ | 66,997 | |||
| US state and local: | |||||
| New Jersey | 26,845 | ||||
| New York State | 5,221 | ||||
| New York City | 3,037 | ||||
| Other | 550 | ||||
| Total | $ | 102,650 | |||
(1) The US federal amount of income taxes paid during the 2025 includes the net cost of the transferrable tax credits.
Retained earnings as of December 31, 2025 includes approximately $51.8 million for which no provision for income tax has been made. This amount represents an allocation of income to bad debt deductions for tax purposes only. Events that would result in taxation of these reserves include the failure to qualify as a bank for tax purposes, distributions in complete or partial liquidation, stock redemptions and excess distributions to stockholders. As of December 31, 2025, the Company had an unrecognized tax liability of $14.7 million with respect to this reserve.
As a result of Lakeland acquisition, the Company acquired federal net operation loss carryforwards. There were approximately $74.9 million of NOL carryforwards available to offset future taxable income as of December 31, 2025. The federal NOLs are subject to annual Code Section 382 limitation in the amount of approximately $30 million. The balance can be carried forward indefinitely, subject to 80% taxable income limit on utilization. The Company has a state NOL carryforward of $126.3 million as a result of the Lakeland acquisition. These net operating losses are subject to an annual limitation of approximately $29.3 million under IRS section 382. Management has determined that it is more likely than not that it will realize the net deferred tax asset based upon the nature and timing of the items listed above. In order to fully realize the net deferred tax asset; however, there can be no assurance that such levels of taxable income will be generated.
The Company’s policy is to report interest and penalties, if any, related to unrecognized tax benefits in income tax expense. The Company did not have any liabilities for uncertain tax positions as of December 31, 2025 and 2024.
The Company and its subsidiaries is required to file a combined New Jersey state income tax return on apportioned and allocated income. Also, the Company and its subsidiaries file a combined tax income tax return in New York State, New York City. The Company, through its bank subsidiary, files a Pennsylvania Mutual Thrift Institution Tax return.
The Company's Federal and Pennsylvania Mutual Thrift Institutions tax returns are open for examination from 2022. The Company's New York State tax returns are open for examination from 2021. The Company's New Jersey State tax returns are open for examination from 2020. Currently, the company’s income tax return for periods ended 12/31/2020-12/31/2023 are under audit form New Jersey Division of Taxation. The company’s income tax returns for period ended 12/31/2022-12/31/2024 are under examination from New Your State tax authorities. As of December 31, 2025, there were no material adjustments proposed by the relevant authorities.
On July 4, 2025, One Big Beautiful Bill Act ("OBBBA") was signed into law. The OBBBA includes significant changes to U.S. tax law, including making permanent certain provisions originally enacted under the Tax Cuts and Jobs Act, such as 100% bonus depreciation, the immediate expensing of domestic research and development costs, and the limitation on the deductibility of business interest expense. There were no material effects of the Act impacting the consolidated financial statements.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Mar 1, 2023 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.