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INCOME TAXES
 12 Months Ended
Dec. 31, 2022
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 2019.
The following table summarizes income tax expense for the years ended December 31, 2022, 2021 and 2020.
202220212020
Current expense$5,170 $7,072 $6,602 
Deferred (benefit) expense(591)942 (554)
Income tax expense$4,579 $8,014 $6,048 
The following table reconciles the Company's effective income tax rate to its statutory federal rate for the years ended December 31, 2022, 2021 and 2020.
202220212020
Statutory federal tax rate21.0 %21.0 %21.0 %
Increase (decrease) resulting from:
State taxes, net of federal benefit1.6 1.1 1.0 
Tax exempt interest income(4.1)(1.7)(2.0)
Income from life insurance(1.3)(0.9)(1.1)
Disallowed interest expense0.3 — 0.1 
Low-income housing credits and related expense(0.2)(0.2)(0.8)
Share-based compensation and related expense(0.5)0.2 — 
Other0.4 0.1 0.4 
Effective income tax rate17.2 %19.6 %18.6 %
For the year ended December 31, 2022, net security losses resulted in an income tax benefit of $34 thousand, compared to income tax expense of $134 thousand related to net security gains for the year ended December 31, 2021, and an income tax benefit of $3 thousand related to net security losses for the year ended December 31, 2020.
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, 2022, 2021 and 2020 and no amounts accrued for penalties at December 31, 2022 and 2021.
The following table summarizes the Company's deferred tax assets and liabilities at December 31, 2022 and 2021.
20222021
Deferred tax assets:
Allowance for loan losses$5,594 $4,655 
Deferred compensation434 515 
Retirement and salary continuation plans3,000 2,633 
Share-based compensation774 681 
Off-balance sheet reserves359 353 
Nonaccrual loan interest467 220 
Deferred loan fees493 1,604 
Net unrealized losses on AFS securities10,405 — 
Net unrealized losses on cash flow hedges204 — 
Purchase accounting adjustments896 1,236 
Bonus accrual1,241 930 
Right-of-use lease liability2,194 2,444 
Net operating loss carryforward1,974 2,218 
Depreciation and other99 67 
Total deferred tax assets28,134 17,556 
Deferred tax liabilities:
Depreciation— 368 
Net unrealized gains on AFS securities— 1,183 
Mortgage servicing rights884 887 
Purchase accounting adjustments675 915 
Right-of-use lease asset2,054 2,311 
Investment in partnerships473 229 
Other17 15 
Total deferred tax liabilities4,103 5,908 
Deferred tax asset, net$24,031 $11,648 
At December 31, 2022, the Company had acquired federal and state net operating loss carryforwards of $9.0 million each, subject to annual loss limitation limits per IRC Section 382, 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, 2022 or 2021.