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INCOME TAXES

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company files income tax returns in the U.S. federal jurisdiction, the Commonwealth of Pennsylvania and the State of Maryland. The Company is no longer subject to tax examination by tax authorities for years before 2015.

The following table summarizes income tax expense for the three and nine months ended September 30, 2019 and 2018.

			Three months ended September 30,																		Nine months ended September 30,
(Dollars in thousands)			2019						2018						2019						2018
Current expense			$	244					$	406					$	334					$	754
Deferred expense			1,096						238						1,348						756
Income tax expense			$	1,340					$	644					$	1,682					$	1,510

Income tax expense includes $489,000 and $6,000 related to net securities gains for the three months ended September 30, 2019 and 2018, and $994,000 and $187,000 related to net security gains for the nine months ended September 30, 2019 and 2018.

The following table summarizes deferred tax assets and liabilities at September 30, 2019 and December 31, 2018.

(Dollars in thousands)			September 30, 2019						December 31, 2018
Deferred tax assets:
Allowance for loan losses			$	3,465					$	3,143
Deferred compensation			396						723
Retirement and salary continuation plans			2,326						1,416
Share-based compensation			592						742
Off-balance sheet reserves			270						219
Nonaccrual loan interest			843						537
Net unrealized losses on AFS securities			0						791
Purchase accounting adjustments			4,349						1,795
Bonus accrual			366						470
Low-income housing credit carryforward			341						641
Net operating loss carryovers			1,872						0
Other			473						321
Total deferred tax assets			15,293						10,798
Deferred tax liabilities:
Depreciation			440						458
Net unrealized gains on AFS securities			711						0
Mortgage servicing rights			644						590
Purchase accounting adjustments			1,682						1,021
Other			250						150
Total deferred tax liabilities			3,727						2,219
Net deferred tax asset, included in Other Assets			$	11,566					$	8,579

The provision for income taxes differs from that computed by applying statutory rates to income before income taxes, primarily due to the effects of tax-exempt income, non-deductible expenses and tax credits. In the first quarter of 2019, the Company recorded a tax benefit of $185,000, related to a favorable tax law clarification concerning the treatment of life insurance assets of an acquired entity. In the second quarter of 2019, the Company recorded a tax benefit of $334,000, related to an increase in its deferred state income tax asset for the effect of the state tax rate change resulting from the Hamilton acquisition.

At September 30, 2019, the Company had low-income housing credit carryforwards that expire through 2038 and acquired federal and state net operating loss carryforwards, that are subject to annual loss limitation limits, that expire through 2037.

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- References

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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

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