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INCOME TAXES | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXESThe 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 2016. The following table summarizes income tax expense for the years ended December 31, 2019, 2018 and 2017.
| 2019 |  | 2018 |  | 2017
Current expense | $ | 934 |  |  | $ | 1,097 |  |  | $ | 1,260 |
Deferred expense | 1,776 |  |  | 543 |  |  | 443 |
Expense due to enactment of federal tax reform legislation | — |  |  | — |  |  | 2,635 |
Income tax expense | $ | 2,710 |  |  | $ | 1,640 |  |  | $ | 4,338 |
The following table reconciles the Company's effective income tax rate to its statutory federal rate for the years ended December 31, 2019, 2018 and 2017.
| 2019 |  | 2018 |  | 2017
Statutory federal tax rate | 21.0 | % |  | 21.0 | % |  | 34.0 | %
Increase (decrease) resulting from: |  |  |  |  |
Tax exempt interest income | (4.2) | % |  | (7.7) | % |  | (13.0) | %
Income from life insurance | (1.7) | % |  | (1.7) | % |  | (2.4) | %
Disallowed interest expense | 0.3 | % |  | 0.8 | % |  | 1.0 | %
Low-income housing credits and related expense | (1.3) | % |  | (2.5) | % |  | (4.6) | %
Merger related | 0.7 | % |  | 0.6 | % |  | — | %
Expense due to enactment of federal tax reform legislation | — | % |  | — | % |  | 21.2 | %
Other | (1.0) | % |  | 0.9 | % |  | (1.3) | %
Effective income tax rate | 13.8 | % |  | 11.4 | % |  | 34.9 | %
Income tax expense includes $997 thousand, $211 thousand and $405 thousand related to net security gains for the years ended December 31, 2019, 2018, and 2017. On December 22, 2017, federal tax reform legislation, commonly referred to as the Tax Cuts and Jobs Act of 2017 (the "Tax Act"), was enacted. Among other things, the Tax Act reduced the Company's statutory federal tax rate from 34% to 21% effective January 1, 2018. As a result, the Company was required to remeasure, through income tax expense, certain deferred tax assets and liabilities using the enacted rate at which the Company expects them to be recovered or settled. The remeasurement of the Company's net deferred tax asset resulted in additional federal deferred tax expense of $2.6 million, which is included in income tax expense for 2017. Also, on December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118"), which provided guidance on accounting for the tax effects of the Tax Act. SAB 118 provided for a measurement period that should not extend beyond one year from the Tax Act's enactment date for companies to complete the accounting under ASC 740, Income Taxes. In remeasuring the Company's net deferred tax asset, the Company estimated the income in 2017 for its limited partnership investments in affordable housing real estate partnerships and interest income on nonperforming loans. Adjustment between the Company's estimates and the actual amounts determined during the measurement period did not have a material impact to the Company's consolidated financial statements. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the results of operations. There were no penalties or interest related to income taxes recorded in the consolidated income statements for the years ended December 31, 2019, 2018 and 2017 and no amounts accrued for penalties at December 31, 2019 and 2018. The following table summarizes the Company's deferred tax assets and liabilities at December 31, 2019, 2018 and 2017.
| 2019 |  | 2018
Deferred tax assets: |  |  |
Allowance for loan losses | $ | 3,418 |  |  | $ | 3,143 |
Deferred compensation | 415 |  |  | 723 |
Retirement and salary continuation plans | 2,357 |  |  | 1,416 |
Share-based compensation | 631 |  |  | 742 |
Off-balance sheet reserves | 234 |  |  | 219 |
Nonaccrual loan interest | 697 |  |  | 537 |
Net unrealized losses on securities available for sale | 127 |  |  | 791 |
Purchase accounting adjustments | 4,081 |  |  | 1,795 |
Bonus accrual | 493 |  |  | 470 |
Low-income housing credit carryforward | — |  |  | 641 |
Net operating loss carryforward | 1,872 |  |  |  | — |
Other | 672 |  |  | 321 |
Total deferred tax assets | 14,997 |  |  | 10,798 |
Deferred tax liabilities: |  |  |
Depreciation | 452 |  |  | 458 |
Mortgage servicing rights | 694 |  |  | 590 |
Purchase accounting adjustments | 1,599 |  |  | 1,021 |
Other | 275 |  |  | 150 |
Total deferred tax liabilities | 3,020 |  |  | 2,219 |
Net deferred tax asset, included in other assets | $ | 11,977 |  |  | $ | 8,579 |
At December 31, 2019, the Company had acquired federal and state net operating loss carryforwards of $11.1 million and $6.7 million, respectively, subject to annual loss limitation limits, that expire through 2037. A deferred tax asset is recognized for these carryforwards because the benefit is more likely than not to be realized. FASB ASC 740, Income Taxes, (“ASC 740”) clarifies the accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined in ASC 740 as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC 740 was applied to all existing tax positions upon initial adoption. There was no liability for uncertain tax positions and no known unrecognized tax benefits at December 31, 2019 or 2018.

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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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