INCOME TAXES

12 Months Ended

Dec. 31, 2021

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)	2021		2020		2019
Current:
Federal	$	35,507	$	35,728	$	34,804
State and other		8,158		8,008		7,773
Deferred:
Federal		5,493		(2,005)		(699)
State and other		2,496		(331)		(1,603)
Provision for income taxes	$	51,654	$	41,400	$	40,275

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

(000’s omitted)	2021		2020
Allowance for credit losses	$	12,435	$	15,004
Employee benefits		7,708		7,552
Operating lease liabilities		7,955		8,601
Other, net		1,250		900
Deferred tax asset		29,348		32,057
Investment securities		7,227		43,325
Goodwill and intangibles		41,917		40,802
Operating lease right-of-use assets		7,693		8,384
Loan origination costs		8,993		7,904
Depreciation		535		3,089
Mortgage servicing rights		278		291
Pension		22,950		16,987
Deferred tax liability		89,593		120,782
Net deferred tax liability	$	(60,245)	$	(88,725)

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:

	2021		2020		2019
Federal statutory income tax rate	21.0	%	21.0	%	21.0	%
Increase (reduction) in taxes resulting from:
Tax-exempt interest	(1.1)		(1.5)		(1.5)
State income taxes, net of federal benefit	3.6		3.0		2.5
Stock-based compensation	(0.9)		(0.8)		(1.6)
Federal tax credits	(1.0)		(1.3)		(1.3)
Other, net	(0.2)		(0.3)		0.1
Effective income tax rate	21.4	%	20.1	%	19.2	%

As of December 31, 2021, 2020 and 2019, 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 2017 may still be examined by the Internal Revenue Service. New York State income tax returns for years after 2017 may still be examined by the New York Department of Taxation and Finance. The Company is currently under examination by the Massachusetts Department of Revenue in connection with tax years 2018 to 2019 and 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.