Income Taxes

12 Months Ended

Dec. 31, 2020

NOTE 10 - INCOME TAXES

The components of the provision for federal income taxes are as follows:


	Years Ended December 31,
	2020		2019
	(In Thousands)
Current	$	7,754	$	1,620
Deferred		(4,468)		988
	$	3,286	$	2,608

Deferred income taxes reflect temporary differences in the recognition of revenue and expenses for tax reporting and financial statement purposes, principally because certain items, such as the allowance for loan losses and loan fees are recognized in different periods for financial reporting and tax return purposes. As of December 31, 2020, the Company has a $4,252,000 net operating loss carryforward that will begin to expire by December 31, 2035. A valuation allowance has not been established for deferred tax assets. Realization of the deferred tax assets is dependent on generating sufficient taxable income. Although realization is not assured, management believes it is more likely than not that all of the deferred tax asset will be realized. Deferred tax assets are recorded in other assets.

Income tax expense of the Company is less than the amounts computed by applying statutory federal income tax rates to income before income taxes because of the following:



	Percentage of Income
	before Income Taxes
	Years Ended December 31,
	2020		2019
Tax at statutory rates	21.0	%	21.0	%
Tax exempt interest income, net of interest expense disallowance	(3.7)		(4.4)
Non-deductible merger related expenses	1.1		—
Earnings and proceeds on life insurance	(1.0)		(1.0)
Other	0.5		(0.1)

	17.9	%	15.5	%

The net deferred tax asset included in other assets in the accompanying Consolidated Balance Sheets includes the following amounts of deferred tax assets and liabilities:



	2020		2019
	(In Thousands)
Deferred tax assets:
Allowance for loan losses	$	2,761	$	1,787
Deferred compensation		758		797
Core deposit intangible		230		141
Prepaid expenses		20		55
Pension liability		118		360
Foreclosed real estate valuation allowance		17		17
Net operating loss carryforward		893		968
Purchase price adjustment		2,832		—
Deferred loan fees		60		—
Other		747		122
Total Deferred Tax Assets		8,436		4,247



Deferred tax liabilities:
Premises and equipment		920		598
Deferred loan fees		—		220
Net unrealized gain on pension liability		272		221
Purchase price adjustment		—		327
Net unrealized gain on securities		1,089		94
Total Deferred Tax Liabilities		2,281		1,460

Net Deferred Tax Asset	$	6,155	$	2,787

The Company’s federal and state income tax returns for taxable years through 2017 have been closed for purposes of examination by the Internal Revenue Service and the Pennsylvania Department of Revenue.

- 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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