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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The following table presents the composition of income tax expense (benefit) for the years ended December 31:
(dollars in thousands) | 2022 |  | 2021 |  | 2020
Federal |  |  |  |  |
Current | $ | 35,514 |  |  | $ | 22,581 |  |  | $ | 4,256 |
Deferred | (2,801) |  |  | 2,273 |  |  | (4,273) |
Total Federal | 32,713 |  |  | 24,854 |  |  | (17) |
State |  |  |  |  |
Current | 828 |  |  | 361 |  |  | 145 |
Deferred | (131) |  |  | 110 |  |  | (129) |
Total State | 697 |  |  | 471 |  |  | 16 |
Total Federal and State | $ | 33,410 |  |  | $ | 25,325 |  |  | $ | (1) |
The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before income taxes. We ordinarily generate an annual effective tax rate that is less than the statutory rate of 21 percent primarily due to benefits resulting from certain partnership investments, such as low income housing and historic rehabilitation projects, tax-exempt interest, excludable dividend income and tax-exempt income on BOLI. The state tax provision is due to taxable business activities conducted at our loan production office in New York. The following table presents a reconciliation of the statutory tax rate to the effective tax rate for the years ended December 31:
| 2022 |  | 2021 |  | 2020
Statutory tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Tax-exempt interest | (1.0) | % |  | (1.3) | % |  | (11.9) | %
Low income housing tax credits | (0.7) | % |  | (1.5) | % |  | (11.1) | %
Bank owned life insurance | (0.2) | % |  | (0.3) | % |  | (1.8) | %
Other | 0.7 | % |  | 0.8 | % |  | 3.8 | %
Effective Tax Rate | 19.8 | % |  | 18.7 | % |  | — | %
The following table presents significant components of our temporary differences as of the dates presented:
| December 31,
(dollars in thousands) | 2022 |  | 2021
Deferred Tax Assets: |  |  |
Allowance for loan losses | $ | 23,383 |  |  | $ | 22,083 |
Net unrealized holding losses on securities available-for-sale | 21,843 |  |  | — |
Lease liabilities | 10,767 |  |  | 10,876 |
State net operating loss carryforwards | 5,924 |  |  | 5,565 |
Net unrealized losses on interest rate swaps | 4,562 |  |  | — |
Cumulative adjustment to funded status of pension | 4,029 |  |  | 3,922 |
Low income housing partnerships | 3,098 |  |  | 3,270 |
Other employee benefits | 3,070 |  |  | 3,433 |
Other | 3,842 |  |  | 3,973 |
Deferred Tax Assets | 80,518 |  |  | 53,122 |
Less: Valuation allowance | (5,924) |  |  | (5,565) |
Total Deferred Tax Assets | 74,594 |  |  | 47,557 |
Deferred Tax Liabilities: |  |  |
Right-of-use lease assets | (9,385) |  |  | (9,603) |
Deferred loan income | (6,113) |  |  | (6,697) |
Prepaid pension | (4,084) |  |  | (4,566) |
Purchase accounting adjustments | (1,853) |  |  | (1,954) |
Depreciation on premises and equipment | (629) |  |  | (1,107) |
Net unrealized holding gains on securities available-for-sale | — |  |  | (2,004) |
Other | (922) |  |  | (1,466) |
Total Deferred Tax liabilities | (22,986) |  |  | (27,397) |
Net Deferred Tax Asset | $ | 51,608 |  |  | $ | 20,160 |
We establish a valuation allowance when it is more likely than not that we will not be able to realize the benefit of the deferred tax assets. Except for Pennsylvania net operating losses, or NOLs, we have determined that no valuation allowance is needed for deferred tax assets because it is more likely than not that these assets will be realized through future reversals of existing temporary differences and through future taxable income. The valuation allowance is reviewed quarterly and adjusted based on management’s assessments of realizable deferred tax assets. Gross deferred tax assets were reduced by a valuation allowance of $5.9 million in 2022 compared to $5.6 million in 2021 related to Pennsylvania income tax NOLs. The Pennsylvania NOL carryforwards total $59.3 million and will expire in the years 2022-2042. Unrecognized Tax Benefits The following table reconciles the change in Federal and State gross unrecognized tax benefits, or UTB, for the years ended December 31:
(dollars in thousands) | 2022 |  | 2021 |  | 2020
Balance at beginning of year | $ | 1,331 |  |  | $ | 1,277 |  |  | $ | 1,051 |
Prior period tax positions | — |  |  | — |  |  | (18) |
Current period tax positions | 317 |  |  | 54 |  |  | 244 |
Balance at End of Year | $ | 1,648 |  |  | $ | 1,331 |  |  | $ | 1,277 |
Amount That Would Impact the Effective Tax Rate if Recognized | $ | 1,148 |  |  | $ | 1,069 |  |  | $ | 1,027 |
We classify interest and penalties as an element of tax expense. We monitor changes in tax statutes and regulations to determine if significant changes will occur over the next 12 months. As of December 31, 2022, no significant changes to UTB are projected; however, tax audit examinations are possible. As of December 31, 2022, all income tax returns filed for the tax years 2019 - 2021 remain subject to examination by the Internal Revenue Service and the New York State Department of Taxation and Finance.

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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