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INCOME TAXES
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
For the years ended December 31, 2021 and 2020, income tax expense attributable to income from operations consisted of the following (in thousands):
20212020
Current expense:
Federal$5,732 $4,413 
State1,033 280 
Total current6,765 4,693 
Deferred expense/(benefit):
Federal527 (136)
State43 50 
Total deferred570 (86)
Income tax expense$7,335 $4,607 

Income tax expense differed from the amounts computed by applying the U.S. Federal statutory income tax rate to income before income tax expense as follows (in thousands):
 20212020
Statutory federal tax rate21 %21 %
Tax computed at statutory rate$7,090 $5,013 
Increase (reduction) resulting from:
Tax-exempt income(380)(395)
831(b) premium adjustment(291)(296)
Dividend exclusion(8)(5)
State taxes, net of Federal impact803 118 
Nondeductible interest expense4 5 
Other items, net117 167 
Income tax expense$7,335 $4,607 
Effective tax rate21.7 %19.3 %
The higher tax expense in 2021 when compared to 2020 can be attributed to an increase in pretax income.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2021 and 2020, are presented below (in thousands):
 20212020
Deferred tax assets:
Allowance for loan losses$5,546 $5,393 
Accrual for employee benefit plans— 47 
Depreciation979 681 
Deferred compensation and directors' fees1,130 1,045 
Operating lease liabilities1,976 1,831 
Purchase accounting adjustment – loans— 1 
Purchase accounting adjustment – fixed assets153 149 
Gain on deemed sale of securities— 54 
Net unrealized losses on securities available for sale886 — 
Accounting for defined benefit pension and other benefit plans1,347 2,302 
Nonaccrued interest473 687 
Accrued expense139 158 
Other items, net127 48 
Total gross deferred tax assets12,756 12,396 
Deferred tax liabilities:
Deferred loan fees and costs355 274 
Prepaid pension3,715 3,344 
Net unrealized gains on securities available for sale— 3,124 
Discount accretion78 50 
Core deposit intangible1,556 1,353 
REIT dividend608 616 
Operating lease right-of-use assets1,976 1,831 
Accrual for employee benefit plans3 — 
Other344 168 
Total gross deferred tax liabilities8,635 10,760 
Net deferred tax asset$4,121 $1,636 

Realization of deferred tax assets is dependent upon the generation of future taxable income. A valuation allowance is recognized when it is more likely than not that some portion of the deferred tax assets will not be realized. In assessing the need for a valuation allowance, management considers the scheduled reversal of the deferred tax assets, the level of historical taxable income and projected future taxable income over the periods in which the temporary differences comprising the deferred tax assets will be deductible.  Based on its assessment, management determined that no valuation allowance is necessary.
As of December 31, 2021 and 2020, the Corporation did not have any unrecognized tax benefits.
The Corporation accounts for interest and penalties related to uncertain tax positions as part of its provision for Federal and State income taxes.  As of December 31, 2021 and 2020, the Corporation did not accrue any interest or penalties related to its uncertain tax positions.
The Corporation is not currently subject to examinations by Federal taxing authorities for the years prior to 2018 and for New York State taxing authorities for the year prior to 2018. New York State taxing authorities are currently auditing the Corporation with the years 2018, 2019, and 2020. The Corporation does not anticipate material adjustments as a result of the New York State audits.