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INCOME TAXES
 12 Months Ended
Dec. 31, 2021
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 2018.
The following table summarizes income tax expense for the years ended December 31, 2021, 2020 and 2019.
202120202019
Current expense$7,072 $6,602 $934 
Deferred expense (benefit)942 (554)1,776 
Income tax expense$8,014 $6,048 $2,710 
The following table reconciles the Company's effective income tax rate to its statutory federal rate for the years ended December 31, 2021, 2020 and 2019.
202120202019
Statutory federal tax rate21.0 %21.0 %21.0 %
Increase (decrease) resulting from:
State taxes, net of federal benefit1.1 1.0 (0.1)
Tax exempt interest income(1.7)(2.0)(4.2)
Income from life insurance(0.9)(1.1)(1.7)
Disallowed interest expense— 0.1 0.3 
Low-income housing credits and related expense(0.2)(0.8)(1.3)
Merger related— — 0.7 
Other0.3 0.4 (0.9)
Effective income tax rate19.6 %18.6 %13.8 %
Income tax expense includes $134 thousand related to net security gains for the year ended December 31, 2021, $3 thousand related to net security losses for the year ended December 31, 2020, and $997 thousand related to net security gains for the year ended December 31, 2019.
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 statements of income for the years ended December 31, 2021, 2020 and 2019 and no amounts accrued for penalties at December 31, 2021 and 2020.
The following table summarizes the Company's deferred tax assets and liabilities at December 31, 2021, and 2020.
20212020
Deferred tax assets:
Allowance for loan losses$4,655 $4,457 
Deferred compensation515 578 
Retirement and salary continuation plans2,633 2,536 
Share-based compensation681 735 
Off-balance sheet reserves353 345 
Nonaccrual loan interest220 395 
Deferred loan fees1,604 1,483 
Net unrealized losses on interest rate swaps— 258 
Purchase accounting adjustments1,236 1,886 
Bonus accrual930 622 
ROU liability2,444 2,003 
Net operating loss carryforward2,218 2,472 
Other67 448 
Total deferred tax assets17,556 18,218 
Deferred tax liabilities:
Depreciation368 74 
Net unrealized gains on securities available for sale1,183 1,148 
Mortgage servicing rights887 614 
Purchase accounting adjustments915 1,206 
ROU Asset2,311 1,903 
Other244 340 
Total deferred tax liabilities5,908 5,285 
Net deferred tax asset, included in other assets$11,648 $12,933 

At December 31, 2021, the Company had acquired federal and state net operating loss carryforwards of $10.1 million each, 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, 2021 or 2020.