INCOME TAXES

12 Months Ended

Dec. 31, 2020

INCOME TAXES

INCOME TAXES

NOTE I:  INCOME TAXES

The provision for income taxes for the years ended December 31 is as follows:

(000’s omitted)	2020		2019		2018
Current:
Federal	$	35,728	$	34,804	$	32,504
State and other		8,008		7,773		9,180
Deferred:
Federal		(2,005)		(699)		2,122
State and other		(331)		(1,603)		541
Provision for income taxes	$	41,400	$	40,275	$	44,347

Components of the net deferred tax liability, included in other liabilities, as of December 31 are as follows:

(000’s omitted)	2020		2019
Allowance for credit losses	$	15,004	$	12,059
Employee benefits		7,552		5,393
Operating lease liabilities		8,601		9,801
Other, net		900		837
Deferred tax asset		32,057		28,090
Investment securities		43,325		21,547
Goodwill and intangibles		40,802		39,189
Operating lease right-of-use assets		8,384		9,566
Loan origination costs		7,904		7,639
Depreciation		3,089		2,736
Mortgage servicing rights		291		162
Pension		16,987		13,769
Deferred tax liability		120,782		94,608
Net deferred tax liability	$	(88,725)	$	(66,518)

The Company has determined that no valuation allowance is necessary as it is more likely than not that the gross deferred tax assets will be realized through future reversals of existing temporary differences and through future taxable income.

A reconciliation of the differences between the federal statutory income tax rate and the effective tax rate for the years ended December 31 is shown in the following table:

	2020		2019		2018
Federal statutory income tax rate	21.0	%	21.0	%	21.0	%
Increase (reduction) in taxes resulting from:
Tax-exempt interest	(1.5)		(1.5)		(1.6)
State income taxes, net of federal benefit	3.0		2.5		3.4
Stock-based compensation	(0.8)		(1.6)		(0.9)
Federal tax credits	(1.3)		(1.3)		(1.4)
Other, net	(0.3)		0.1		0.3
Effective income tax rate	20.1	%	19.2	%	20.8	%

A reconciliation of the unrecognized tax benefits for the years ended December 31 is shown in the following table:

(000’s omitted)	2020		2019		2018
Unrecognized tax benefits at beginning of year	$	0	$	0	$	24
Changes related to:
Lapse of statutes of limitations		0		0		(24)
Unrecognized tax benefits at end of year	$	0	$	0	$	0

As of December 31, 2020, there was no amount of material unrecognized tax benefits that would impact the Company’s effective tax rate if recognized. It is reasonably possible that the amount of unrecognized tax benefits could change in the next twelve months as a result of various examinations and expiration of statutes of limitations on prior tax returns.

The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits as part of income taxes in the consolidated statement of income. The accrued interest related to tax positions was immaterial.

The Company’s federal and state income tax returns are routinely subject to examination from various governmental taxing authorities. Such examinations may result in challenges to the tax return treatment applied by the Company to specific transactions. Management believes that the assumptions and judgment used to record tax-related assets or liabilities have been appropriate. Future examinations by taxing authorities of the Company’s federal or state tax returns could have a material impact on the Company’s results of operations. The Company’s federal income tax returns for years after 2016 may still be examined by the Internal Revenue Service. New York State income tax returns for years after 2016 may still be examined by the New York Department of Taxation and Finance. The Company is currently under examination by the New York Department of Taxation and Finance in connection with tax years 2015 to 2017, and has not received any notices of proposed adjustments. It is not possible to estimate, if and when those examinations may be completed.

The CARES Act is expected to have an immaterial impact as it relates to income taxes and the Company will continue to assess impacts in future periods.