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INCOME TAXES | 12 Months Ended
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Dec. 31, 2020
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 2017. The following table summarizes income tax expense for the years ended December 31, 2020, 2019 and 2018.
| 2020 |  | 2019 |  | 2018
Current expense | $ | 6,602 |  |  | $ | 934 |  |  | $ | 1,097 |
Deferred expense | (554) |  |  | 1,776 |  |  | 543 |
Income tax expense | $ | 6,048 |  |  | $ | 2,710 |  |  | $ | 1,640 |
The following table reconciles the Company's effective income tax rate to its statutory federal rate for the years ended December 31, 2020, 2019 and 2018.
| 2020 |  | 2019 |  | 2018
Statutory federal tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Increase (decrease) resulting from: |  |  |  |  |
State taxes, net of federal benefit | 1.0 | % |  | (0.1) | % |  | — | %
Tax exempt interest income | (2.0) | % |  | (4.2) | % |  | (7.7) | %
Income from life insurance | (1.1) | % |  | (1.7) | % |  | (1.7) | %
Disallowed interest expense | 0.1 | % |  | 0.3 | % |  | 0.8 | %
Low-income housing credits and related expense | (0.8) | % |  | (1.3) | % |  | (2.5) | %
Merger related | — | % |  | 0.7 | % |  | 0.6 | %
Other | 0.4 | % |  | (0.9) | % |  | 0.9 | %
Effective income tax rate | 18.6 | % |  | 13.8 | % |  | 11.4 | %
Income tax expense includes $3 thousand related to net security losses for the year ended December 31, 2020 and $997 thousand and $211 thousand related to net security gains for the years ended December 31, 2019, and 2018, respectively. 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, 2020, 2019 and 2018 and no amounts accrued for penalties at December 31, 2020 and 2019. The following table summarizes the Company's deferred tax assets and liabilities at December 31, 2020, and 2019.
| 2020 |  | 2019
Deferred tax assets: |  |  |
Allowance for loan losses | $ | 4,457 |  |  | $ | 3,418 |
Deferred compensation | 578 |  |  | 415 |
Retirement and salary continuation plans | 2,536 |  |  | 2,357 |
Share-based compensation | 735 |  |  | 631 |
Off-balance sheet reserves | 345 |  |  | 234 |
Nonaccrual loan interest | 395 |  |  | 697 |
Deferred loan fees | 1,483 |  |  | 153 |
Net unrealized losses on securities available for sale | — |  |  | 127 |
Net unrealized losses on interest rate swaps | 258 |  |  | — |
Purchase accounting adjustments | 1,886 |  |  | 4,081 |
Bonus accrual | 622 |  |  | 493 |
ROU liability | 2,003 |  |  | 2,123 |
Net operating loss carryforward | 2,472 |  |  | 1,872 |
Other | 448 |  |  | 417 |
Total deferred tax assets | 18,218 |  |  | 17,018 |
Deferred tax liabilities: |  |  |
Depreciation | 74 |  |  | 452 |
Net unrealized gains on securities available for sale | 1,148 |  |  | — |
Mortgage servicing rights | 614 |  |  | 694 |
Purchase accounting adjustments | 1,206 |  |  | 1,599 |
ROU Asset | 1,903 |  |  | 2,021 |
Other | 340 |  |  | 275 |
Total deferred tax liabilities | 5,285 |  |  | 5,041 |
Net deferred tax asset, included in other assets | $ | 12,933 |  |  | $ | 11,977 |
At December 31, 2020, the Company had acquired federal and state net operating loss carryforwards of $11.2 million and $9.0 million, respectively, subject to annual loss limitation limits, that expire beginning in 2033. 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, 2020 or 2019.

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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 http://asc.fasb.org/extlink&oid=84230637&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 http://asc.fasb.org/extlink&oid=116825942&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 http://asc.fasb.org/extlink&oid=84230637&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 http://asc.fasb.org/extlink&oid=116825942&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 http://asc.fasb.org/extlink&oid=84230637&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 http://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 http://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 http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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