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INCOME TAXES | 12 Months Ended
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Dec. 31, 2023
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 2020. The following table summarizes income tax expense for the years ended December 31, 2023, 2022 and 2021.
| 2023 |  | 2022 |  | 2021
Current expense | $ | 10,021 |  |  | $ | 5,170 |  |  | $ | 7,072 |
Deferred (benefit) expense | (651) |  |  | (591) |  |  | 942 |
Income tax expense | $ | 9,370 |  |  | $ | 4,579 |  |  | $ | 8,014 |
The following table reconciles the Company's effective income tax rate to its statutory federal rate for the years ended December 31, 2023, 2022 and 2021.
| 2023 |  | 2022 |  | 2021
Statutory federal tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Increase (decrease) resulting from: |  |  |  |  |
State taxes, net of federal benefit | 1.5 |  |  | 1.6 |  |  | 1.1 |
Tax exempt interest income | (2.5) |  |  | (4.1) |  |  | (1.7) |
Income from life insurance | (0.8) |  |  | (1.3) |  |  | (0.9) |
Disallowed interest expense | 1.1 |  |  | 0.3 |  |  | — |
Low-income housing credits and related expenses | (0.1) |  |  | (0.2) |  |  | (0.2) |
Merger-related expenses | 0.3 |  |  | — |  |  | — |
Share-based compensation and related expenses | (0.1) |  |  | (0.5) |  |  | 0.2 |
Other | 0.4 |  |  | 0.4 |  |  | 0.1 |
Effective income tax rate | 20.8 | % |  | 17.2 | % |  | 19.6 | %
Net investment security losses resulted in an income tax benefit of $10 thousand, and $34 thousand for the years ended December 31, 2023 and 2022, respectively, and an income tax expense of $134 thousand related to net investment security losses for the year ended December 31, 2021. 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, 2023, 2022 and 2021 and no amounts accrued for penalties at December 31, 2023 and 2022. The following table summarizes the Company's deferred tax assets and liabilities at December 31, 2023 and 2022.
| 2023 |  | 2022
Deferred tax assets: |  |  |
Allowance for credit losses | $ | 6,445 |  |  | $ | 5,594 |
Deferred compensation | 491 |  |  | 434 |
Retirement and salary continuation plans | 3,329 |  |  | 3,000 |
Share-based compensation | 712 |  |  | 774 |
Off-balance sheet reserves | 387 |  |  | 359 |
Nonaccrual loan interest | 1,388 |  |  | 467 |
Deferred loan fees | 342 |  |  | 493 |
Net unrealized losses on AFS securities | 7,331 |  |  | 10,405 |
Net unrealized losses on cash flow hedges | 54 |  |  | 204 |
Purchase accounting adjustments | 745 |  |  | 896 |
Bonus accrual | 845 |  |  | 1,241 |
Right-of-use lease liability | 2,594 |  |  | 2,194 |
Net operating loss carryforward | 1,770 |  |  | 1,974 |
Depreciation and other | 677 |  |  | 99 |
Total deferred tax assets | 27,110 |  |  | 28,134 |
Deferred tax liabilities: |  |  |
Depreciation | 493 |  |  | — |
Mortgage servicing rights | 834 |  |  | 884 |
Purchase accounting adjustments | 479 |  |  | 675 |
Right-of-use lease asset | 2,433 |  |  | 2,054 |
Investment in partnerships | 468 |  |  | 473 |
Other | 386 |  |  | 17 |
Total deferred tax liabilities | 5,093 |  |  | 4,103 |
Deferred tax asset, net | $ | 22,017 |  |  | $ | 24,031 |
At December 31, 2023, the Company had acquired federal and state net operating loss carryforwards of $1.8 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, 2023 or 2022.

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