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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes |
(1 7.) | INCOME TAXES
The income tax expense for the years ended December 31 consisted of the following (in thousands):
|  | 2019 |  |  | 2018 |  |  | 2017 |
Current tax expense (benefit): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 8,882 |  |  | $ | 19,351 |  |  | $ | (3,031 | )
State |  |  | 1,308 |  |  |  | 1,135 |  |  |  | 573 |
Total current tax expense (benefit) |  |  | 10,190 |  |  |  | 20,486 |  |  |  | (2,458 | )
Deferred tax expense (benefit): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 280 |  |  |  | (10,303 | ) |  |  | 12,297 |
State |  |  | 89 |  |  |  | (177 | ) |  |  | 106 |
Total deferred tax expense (benefit) |  |  | 369 |  |  |  | (10,480 | ) |  |  | 12,403 |
Total income tax expense |  | $ | 10,559 |  |  | $ | 10,006 |  |  | $ | 9,945 |
Income tax expense differed from the statutory federal income tax rate for the years ended December 31 as follows:
|  | 2019 |  |  | 2018 |  |  | 2017 |
Statutory federal tax rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 35.0 | %
Increase (decrease) resulting from: |  |  |  |  |  |  |  |  |  |  |  |
Tax exempt interest income |  |  | (1.9 | ) |  |  | (2.6 | ) |  |  | (5.6 | )
Tax credits and adjustments |  |  | (3.0 | ) |  |  | (0.3 | ) |  |  | (6.7 | )
Non-taxable earnings on company owned life insurance |  |  | (0.6 | ) |  |  | (0.8 | ) |  |  | (1.4 | )
State taxes, net of federal tax benefit |  |  | 1.9 |  |  |  | 1.5 |  |  |  | 1.1 |
Nondeductible expenses |  |  | 0.2 |  |  |  | 0.2 |  |  |  | 0.3 |
Goodwill and contingent consideration adjustments |  |  | - |  |  |  | 1.0 |  |  |  | 0.3 |
Other, net |  |  | 0.2 |  |  |  | 0.2 |  |  |  | (0.1 | )
Effective tax rate |  |  | 17.8 | % |  |  | 20.2 | % |  |  | 22.9 | %
Total income tax expense (benefit) was as follows for the years ended December 31 (in thousands):
|  | 2019 |  |  | 2018 |  |  | 2017 |
Income tax expense |  | $ | 10,559 |  |  | $ | 10,006 |  |  | $ | 9,945 |
Shareholder’s equity |  |  | 3,113 |  |  |  | (3,156 | ) |  |  | 3,909 |
The Company recognizes deferred income taxes for the estimated future tax effects of differences between the tax and financial statement bases of assets and liabilities considering enacted tax laws. These differences result in deferred tax assets and liabilities, which are included in other assets in the Company’s consolidated statements of financial condition. The Company also assesses the likelihood that deferred tax assets will be realizable based on, among other considerations, future taxable income and establishes, if necessary, a valuation allowance for those deferred tax assets determined to not likely be realizable. A deferred tax asset valuation allowance is recognized if, based on the weight of available evidence (both positive and negative), it is more likely than not that some portion or all of the deferred tax assets will not be realized. The future realization of deferred tax benefits depends upon the existence of sufficient taxable income within the carry-back and carry-forward periods. Management’s judgment is required in determining the appropriate recognition of deferred tax assets and liabilities, including projections of future taxable income. In 2019, the Company recognized the impact of its investments in partnerships that placed property in service during the year, which generated tax credits due to qualifying expenses. At the time that a structure is placed into service, the Company is eligible for federal and New York State tax credits. See Note 1 for the Company’s accounting policy for income taxes and these tax credit investments.
(1 7.) | INCOME TAXES (Continued)
The Company’s net deferred tax asset (liability) is included in other assets in the consolidated statements of financial condition. The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities are as follows at December 31 (in thousands):
|  | 2019 |  |  | 2018 |
Deferred tax assets: |  |  |  |  |  |  |  |
Allowance for loan losses |  | $ | 7,810 |  |  | $ | 8,550 |
Deferred compensation |  |  | 1,095 |  |  |  | 1,771 |
Investment in limited partnerships |  |  | 1,191 |  |  |  | 660 |
SERP agreements |  |  | 418 |  |  |  | 417 |
Interest on nonaccrual loans |  |  | 191 |  |  |  | 106 |
Share-based compensation |  |  | 586 |  |  |  | 541 |
Net unrealized loss on securities available for sale |  |  | - |  |  |  | 2,848 |
Other |  |  | 224 |  |  |  | 138 |
Gross deferred tax assets |  |  | 11,515 |  |  |  | 15,031 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Prepaid expenses |  |  | 498 |  |  |  | 583 |
Prepaid pension costs |  |  | 897 |  |  |  | 1,415 |
Intangible assets |  |  | 2,643 |  |  |  | 2,581 |
Depreciation and amortization |  |  | 1,961 |  |  |  | 2,096 |
Net unrealized gain on securities available for sale |  |  | 301 |  |  |  | - |
Loan servicing assets |  |  | 289 |  |  |  | 258 |
Other |  |  | 550 |  |  |  | 240 |
Gross deferred tax liabilities |  |  | 7,139 |  |  |  | 7,173 |
Net deferred tax asset |  | $ | 4,376 |  |  | $ | 7,858 |
On December 22, 2017, the TCJ Act was signed into law which, among other items, reduces the federal statutory corporate tax rate from 35 percent to 21 percent, effective January 1, 2018. The TCJ Act also contains other provisions that may affect the Company currently or in future years. Among these are changes to the deductibility of meals and entertainment, the deductibility of executive compensation, accelerated expensing of depreciable property for assets placed into service after September 27, 2017 and before 2023, limits on the deductibility of net interest expense, elimination of the corporate alternative minimum tax, limits on net operating loss carryforwards to 80% of taxable income, among other provisions. Results for the fourth quarter and full year of 2017 were positively impacted by a $2.9 million reduction in income tax expense due to the TCJ Act, primarily driven by a revaluation adjustment to the net deferred tax liability. Based upon the Company’s historical and projected future levels of pre-tax and taxable income, the scheduled reversals of taxable temporary differences to offset future deductible amounts, and prudent and feasible tax planning strategies, management believes it is more likely than not that the deferred tax assets will be realized. As such, no valuation allowance has been recorded as of December 31, 2019 or 2018. The Company and its subsidiaries are primarily subject to federal and New York income taxes. The federal income tax years currently open for audits are 2016 through 2019. The New York income tax years currently open for audits are 2017 through 2019. At December 31, 2019, the Company had no federal or New York net operating loss or tax credits carryforwards.
(1 7.) | INCOME TAXES (Continued)
The Company’s unrecognized tax benefits and changes in unrecognized tax benefits were not significant as of or for the years ended December 31, 2019, 2018 and 2017. There were no material interest or penalties recorded in the income statement in income tax expense for the years ended December 31, 2019, 2018 and 2017. As of December 31, 2019 and 2018, there were no amounts accrued for interest or penalties related to uncertain tax positions.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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