TOMPKINS FINANCIAL CORPTMP
TOMPKINS FINANCIAL CORP Income Taxes Disclosure
Income Taxes
The income tax expense (benefit) attributable to income from operations is summarized as follows:
| (In thousands) | Current | Deferred | Total | ||||||||
| 2025 | |||||||||||
| Federal | $ | 46,904 | $ | (970) | $ | 45,934 | |||||
| State | 18,236 | (385) | 17,851 | ||||||||
| Total | $ | 65,140 | $ | (1,355) | $ | 63,785 | |||||
| 2024 | |||||||||||
| Federal | $ | 20,248 | $ | (3,313) | $ | 16,935 | |||||
| State | 4,837 | 231 | 5,068 | ||||||||
| Total | $ | 25,085 | $ | (3,082) | $ | 22,003 | |||||
| 2023 | |||||||||||
| Federal | $ | 2,583 | $ | 381 | $ | 2,964 | |||||
| State | 346 | (815) | (469) | ||||||||
| Total | $ | 2,929 | $ | (434) | $ | 2,495 | |||||
The primary reasons for the differences between the Company's income tax expense and the amount computed by applying the statutory federal income tax rate to earnings are as follows:
| 2025 | 2024 | 2023 | ||||||||||||||||||
| (In thousands) | Amount | % of pretax income | Amount | % of pretax income | Amount | % of pretax income | ||||||||||||||
| Federal income tax at statutory rate | $ | 47,220 | 21.0 | % | $ | 19,499 | 21.0 | % | $ | 2,520 | 21.0 | % | ||||||||
State and local income taxes, net of federal benefit1, 2, 3 | 14,102 | 6.3 | % | 4,004 | 4.3 | % | (371) | (3.1) | % | |||||||||||
| Tax credits | ||||||||||||||||||||
| Low income housing tax credits | (252) | (0.1) | % | (224) | (0.2) | % | (99) | (0.8) | % | |||||||||||
| Nontaxable or nondeductible items | ||||||||||||||||||||
| Tax exempt income, net | (1,005) | (0.4) | % | (1,219) | (1.3) | % | (1,131) | (9.4) | % | |||||||||||
Equity-based compensation4 | (140) | (0.1) | % | (74) | (0.1) | % | 132 | 1.1 | % | |||||||||||
| Bank-owned life insurance income | (500) | (0.2) | % | (579) | (0.6) | % | (361) | (3.0) | % | |||||||||||
| Section 162(m) limitation | 212 | 0.1 | % | 113 | 0.1 | % | 127 | 1.1 | % | |||||||||||
| Non-deductible meals & entertainment | 155 | 0.1 | % | 100 | 0.1 | % | 152 | 1.3 | % | |||||||||||
| Additional tax gain on sale of subsidiary | 3,137 | 1.4 | % | 0 | 0.0 | % | 0 | 0.0 | % | |||||||||||
| Proportional amortization expense | 241 | 0.1 | % | 252 | 0.3 | % | 170 | 1.4 | % | |||||||||||
| Other | 55 | 0.0 | % | 114 | 0.1 | % | 80 | 0.7 | % | |||||||||||
| Other adjustments | ||||||||||||||||||||
| Surrender of bank-owned life insurance | 0 | 0.0 | % | 0 | 0.0 | % | 1,628 | 13.6 | % | |||||||||||
| Deductible ESOP dividends under Section 404(k) | (288) | (0.1) | % | (310) | (0.3) | % | (305) | (2.5) | % | |||||||||||
| All other | 848 | 0.3 | % | 327 | 0.3 | % | (47) | (0.6) | % | |||||||||||
| Effective tax rate | $ | 63,785 | 28.4 | % | $ | 22,003 | 23.7 | % | $ | 2,495 | 20.8 | % | ||||||||
1 State taxes in New York made up the majority (greater than 50 percent) of the tax effect in this category for the December 31, 2025 period.
2 State taxes in New York made up the majority (greater than 50 percent) of the tax effect in this category for the December 31, 2024 period.
3 State tax benefit in New York and state tax expense in Pennsylvania made up the majority (greater than 50 percent) of the tax effect in this category for the December 31, 2023 period.
4 Equity-based compensation includes any excess benefits or shortfalls from vestings and exercises.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities as of December 31 were as follows:
| (In thousands) | 2025 | 2024 | ||||||
| Deferred tax assets: | ||||||||
| Allowance for credit losses | $ | 14,787 | $ | 14,733 | ||||
| Lease liability | 6,933 | 7,119 | ||||||
| Interest income on nonperforming loans | 684 | 870 | ||||||
| Compensation and benefits | 12,600 | 12,936 | ||||||
| Purchase accounting adjustments | 454 | 323 | ||||||
| Liabilities held at fair value | 83 | 78 | ||||||
| Deferred loan fees and costs | 1,206 | 1,290 | ||||||
| Net operating loss carryforwards | 0 | 0 | ||||||
| Other | 502 | 753 | ||||||
| Total | $ | 37,249 | $ | 38,102 | ||||
| Deferred tax liabilities: | ||||||||
| Prepaid pension | 12,387 | 12,019 | ||||||
| Right of use asset | 6,584 | 6,763 | ||||||
| Depreciation | 2,926 | 3,068 | ||||||
| Intangibles | 157 | 1,675 | ||||||
| Leases | 1,866 | 2,199 | ||||||
| Taxable bank-owned life insurance policies | 0 | 0 | ||||||
| Contingent Commissions | 0 | 871 | ||||||
| Other | 1,803 | 1,336 | ||||||
| Total deferred tax liabilities | $ | 25,723 | $ | 27,931 | ||||
| Net deferred tax asset at year-end | 11,526 | 10,171 | ||||||
| Net deferred tax asset at beginning of year | 10,171 | 7,200 | ||||||
| Increase in net deferred tax asset | 1,355 | 2,971 | ||||||
| Investments in tax credit structures accounting standard adoption recorded through equity | 0 | 111 | ||||||
| Deferred tax benefit | $ | (1,355) | $ | (3,082) | ||||
Net operating loss carryforwards for New York and New York City purposes of $8.5 million and $344,000, respectively, were generated in 2023. These net operating losses were fully utilized in 2024.
The above analysis does not include recorded deferred tax assets (liabilities) of $2.3 million and $33.9 million as of December 31, 2025 and 2024, respectively, related to net unrealized holdings losses/(gains) in the available-for-sale debt securities portfolio. In addition, the analysis excludes recorded deferred tax assets of $4.0 million and $5.6 million, as of December 31, 2025 and 2024, respectively, related to employee benefit plans.
Realization of deferred tax assets is dependent upon the generation of future taxable income or the existence of sufficient taxable income. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. In assessing the need for a valuation allowance, management considers the scheduled reversal of the deferred tax liabilities, the level of historical taxable income, and the projected future taxable income over the periods in which the temporary differences comprising the deferred tax assets will be deductible. Based on its assessment, management determined that no valuation allowance was necessary at December 31, 2025 and 2024.
Cash paid (net of refunds) during the year for taxes was as follows:
| (In thousands) | 2025 | 2024 | 2023 | ||||||||
| Federal | $ | 20,850 | $ | 12,384 | $ | 8,000 | |||||
| State and local | |||||||||||
| New York | 5,594 | 2,093 | 1,604 | ||||||||
| All other state and local jurisdictions | 920 | 349 | 777 | ||||||||
| Total | $ | 27,364 | $ | 14,826 | $ | 10,381 | |||||
At December 31, 2025 and December 31, 2024, the Company had no ASC 740-10 unrecognized tax benefits. The Company recognizes interest and penalties on unrecognized tax benefits in income tax expense in its Consolidated Statements of Income.
The Company is subject to U.S. federal income tax and income tax in New York and various state jurisdictions. All tax years ending after December 31, 2021 are open to examination by the taxing authorities.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Mar 1, 2022 | |
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.