INCOME TAXES

12 Months Ended

Dec. 31, 2020

The components of income tax expense for the years ended December 31, 2020 and 2019, are as follows:


In thousands	2020		2019
Federal:
Current	$	4,672	$	5,169
Deferred	(1,121)		122
	3,551		5,291
State:
Current	805		338
Deferred	(48)		16
	757		354
	$	4,308	$	5,645

Reconciliations of the statutory federal income tax to the income tax expense reported in the consolidated statements of income for the years ended December 31, 2020 and 2019, are as follows:


	Percentage of Income before Income Taxes
	2020		2019
Federal income tax at statutory rate	21.0	%	21.0	%
State income taxes, net of federal benefit	2.6	%	1.0	%
Tax-exempt income	(2.0)	%	(1.5)	%
Earnings on investment in bank-owned life insurance	(1.3)	%	(0.8)	%
Rehabilitation and low-income housing credits	(1.1)	%	(1.0)	%
Reduction of federal tax rate	—	%	—	%
Other	(0.1)	%	0.5	%
	19.1	%	19.2	%

Rehabilitation and low-income housing income tax credits were $259,000 and $281,000, during 2020 and 2019, respectively.

Components of deferred tax assets and liabilities at December 31 were as follows:


In thousands	2020		2019
Deferred tax assets:
Allowance for loan losses	$	4,367	$	2,995
Available for sale securities	—		—
Accrued deferred compensation	1,053		941
Pension	2,939		2,033
Deferred loan fees	634		—
Other-than-temporary impairment	43		43
Nonaccrual interest	359		194
Deferred director fees	766		664
Acquisition accounting	(501)		377
Other	1,747		604
	11,407		7,851
Deferred tax liabilities:
Deferred loan fees	—		94
Available for sale securities	1,328		391
Prepaid pension benefit cost	4,207		4,154
Prepaid expenses	130		129
Accumulated depreciation	555		221
Goodwill/intangibles	1,259		1,181
	7,479		6,170
Net Deferred Tax Asset included in Other Assets	$	3,928	$	1,681

The Corporation did not have any uncertain tax positions at December 31, 2020 and 2019. The Corporation’s policy is to recognize interest and penalties on unrecognized tax benefits in income tax expense in the Consolidated Statements of Income.

Years that remain open for potential review by the Internal Revenue Service are 2017 through 2020.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law making several changes to the Internal Revenue Code. The changes include, but are not limited to: increasing the limitation on the amount of deductible interest expense, allowing companies to carryback certain net operating losses, and increasing the amount of net operating loss carryforwards that corporations can use to offset taxable income.

The tax law changes in the CARES Act did not have a material impact on the Corporation’s income tax provision.

- 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.

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