INCOME TAXES

3 Months Ended

Mar. 31, 2020

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 2016.

The following table summarizes income tax expense for the three months ended March 31, 2020 and 2019:


	Three months ended March 31,
	2020		2019
Current expense	$	28	$	21


Deferred expense	1,011		211




Income tax expense	$	1,039	$	232

The following table summarizes deferred tax assets and liabilities at March 31, 2020 and December 31, 2019:


(Dollars in thousands)	March 31, 2020		December 31, 2019
Deferred tax assets:
Allowance for loan losses	$	3,674	$	3,418
Deferred compensation	414		415
Retirement and salary continuation plans	2,384		2,357
Share-based compensation	574		631
Off-balance sheet reserves	231		234
Nonaccrual loan interest	720		697
Net unrealized losses on AFS securities	3,749		127
Purchase accounting adjustments	3,042		4,081
Bonus accrual	167		493
Low-income housing credit carryforward	115		—



Net operating loss carryovers	1,759		1,872

Other	629		672
Total deferred tax assets	17,458		14,997
Deferred tax liabilities:
Depreciation	443		452

Mortgage servicing rights	694		694

Purchase accounting adjustments	1,471		1,599
Other	275		275
Total deferred tax liabilities	2,883		3,020
Net deferred tax asset, included in other assets	$	14,575	$	11,977

At March 31, 2020, 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 March 31, 2020 or December 31, 2019.