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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

(19.) INCOME TAXES

The income tax expense for the years ended December 31 consisted of the following (in thousands):

 

 

 

2021

 

 

2020

 

 

2019

 

Current tax expense:

 

 

 

 

 

 

 

 

 

Federal

 

$

11,453

 

 

$

10,041

 

 

$

8,882

 

State

 

 

2,854

 

 

 

1,873

 

 

 

1,308

 

Total current tax expense

 

 

14,307

 

 

 

11,914

 

 

 

10,190

 

Deferred tax expense (benefit):

 

 

 

 

 

 

 

 

 

Federal

 

 

4,384

 

 

 

(3,306

)

 

 

280

 

State

 

 

834

 

 

 

(1,217

)

 

 

89

 

Total deferred tax expense (benefit)

 

 

5,218

 

 

 

(4,523

)

 

 

369

 

Total income tax expense

 

$

19,525

 

 

$

7,391

 

 

$

10,559

 

 

Income tax expense differed from the statutory federal income tax rate for the years ended December 31 as follows:

 

 

 

2021

 

 

2020

 

 

2019

 

Statutory federal tax rate

 

 

21.0

%

 

 

21.0

%

 

 

21.0

%

Increase (decrease) resulting from:

 

 

 

 

 

 

 

 

 

Tax exempt interest income

 

 

(0.7

)

 

 

(2.0

)

 

 

(1.9

)

Tax credits and adjustments

 

 

(2.6

)

 

 

(3.4

)

 

 

(3.0

)

Non-taxable earnings on company owned life insurance

 

 

(0.6

)

 

 

(0.9

)

 

 

(0.6

)

State taxes, net of federal tax benefit

 

 

3.0

 

 

 

1.1

 

 

 

1.9

 

Nondeductible expenses

 

 

-

 

 

 

0.1

 

 

 

0.2

 

Goodwill and contingent consideration adjustments

 

 

-

 

 

 

-

 

 

 

-

 

Other, net

 

 

-

 

 

 

0.3

 

 

 

0.2

 

Effective tax rate

 

 

20.1

%

 

 

16.2

%

 

 

17.8

%

 

Total income tax expense (benefit) was as follows for the years ended December 31 (in thousands):

 

 

 

2021

 

 

2020

 

 

2019

 

Income tax expense

 

$

19,525

 

 

$

7,391

 

 

$

10,559

 

Shareholder’s equity

 

 

(5,282

)

 

 

5,732

 

 

 

3,113

 

 

(19.) INCOME TAXES (Continued)

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 2021 and 2020, the Company recognized the impact of its investments in limited partnerships that generated qualifying tax credits resulting in a $2.6 million and $1.5 million reduction in income tax expense, respectively, and a $431 thousand and $275 thousand net loss recorded in noninterest income, respectively. See Note 1 for the Company’s accounting policy for income taxes and these tax credit investments.

The Company’s 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 the deferred tax assets and deferred tax liabilities are as follows at December 31 (in thousands):

 

 

 

2021

 

 

2020

 

Deferred tax assets:

 

 

 

 

 

 

Allowance for credit losses

 

$

10,627

 

 

$

14,239

 

Leases - right of use obligations

 

 

5,993

 

 

 

5,510

 

Deferred compensation

 

 

1,365

 

 

 

1,149

 

Investment in limited partnerships

 

 

-

 

 

 

1,418

 

SERP agreements

 

 

262

 

 

 

323

 

Share-based compensation

 

 

759

 

 

 

602

 

Tax attribute carryforward benefits

 

 

446

 

 

 

-

 

Net unrealized loss on securities available for sale

 

 

1,712

 

 

 

-

 

Other

 

 

579

 

 

 

236

 

Gross deferred tax assets

 

 

21,743

 

 

 

23,477

 

Deferred tax liabilities:

 

 

 

 

 

 

Leases - right of use assets

 

 

5,533

 

 

 

5,113

 

Investments in limited partnerships

 

 

126

 

 

 

-

 

Prepaid expenses

 

 

662

 

 

 

635

 

Prepaid pension costs

 

 

1,677

 

 

 

1,183

 

Intangible assets

 

 

2,418

 

 

 

2,286

 

Depreciation and amortization

 

 

3,471

 

 

 

2,046

 

Net unrealized gain on securities available for sale

 

 

-

 

 

 

5,079

 

Loan servicing assets

 

 

389

 

 

 

338

 

Deferred loan origination costs

 

 

830

 

 

 

623

 

Other

 

 

403

 

 

 

4

 

Gross deferred tax liabilities

 

 

15,509

 

 

 

17,307

 

Net deferred tax asset

 

$

6,234

 

 

$

6,170

 

 

 

(19.) INCOME TAXES (Continued)

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, 2021 or 2020.

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 2018 through 2021. The New York income tax years currently open for audits are 2019 through 2021.

At December 31, 2021, the Company had no federal or New York net operating loss or tax credit carryforwards. The Company has a capital loss carryforward totaling $1.7 million as of December 31, 2021 that was generated in the 2020 tax year. A portion of the capital loss will be carried back to prior years and the remainder, if unused, will expire in 2025. Realization of this tax benefit is dependent on the ability to generate sufficient capital gains in an appropriate tax year to offset the remaining capital loss carryforward. Management has determined it is more likely than not to be realized, therefore we have not established a valuation allowance on this tax benefit.

 

The Company’s unrecognized tax benefits and changes in unrecognized tax benefits were not significant as of or for the years ended December 31, 2021, 2020 and 2019. There were no material interest or penalties recorded in the income statement in income tax expense for the years ended December 31, 2021, 2020 and 2019. As of December 31, 2021 and 2020, there were no amounts accrued for interest or penalties related to uncertain tax positions.