12.	Income Taxes

The Corporation and the Bank file a consolidated federal income tax return. The provision for income taxes for the years ended

December 31

is comprised of the following:

(Dollar amounts in thousands)	2019		2018
Current	$	1,437	$	298
Deferred		225		335
Total	$	1,662	$	633

A reconciliation between the provision for income taxes and the amount computed by multiplying operating results before income taxes by the statutory federal income tax rate of

21%

for the years ended

December 31, 2019

and

2018

is as follows:

(Dollar amounts in thousands)	2019						2018
				% Pre-tax						% Pre-tax
	Amount			Income			Amount			Income
Provision at statutory tax rate	$	2,019			21.0	%	$	1,017			21.0	%
Increase (decrease) resulting from:
Tax free interest, net of disallowance		(210	)		(2.2	%)		(234	)		(4.8	%)
Earnings on bank-owned life insurance		(85	)		(0.9	%)		(71	)		(1.5	%)
Tax free gain on retirement of CMFP shares		—			—			(145	)		(3.0	%)
Other, net		(62	)		(0.6	%)		66			1.4	%
Provision	$	1,662			17.3	%	$	633			13.1	%

The tax effects of temporary differences between the financial reporting basis and income tax basis of assets and liabilities that are included in the net deferred tax asset as of

December 31

relate to the following:

(Dollar amounts in thousands)	2019		2018
Deferred tax assets:
Allowance for loan losses	$	1,365	$	1,351
Funded status of pension plan		1,389		1,287
Lease liability		358		—
Net unrealized loss on securities		26		401
Deferred compensation		417		391
Accrued incentive compensation		91		148
Nonaccrual loan interest income		40		75
Securities impairment		70		70
Stock compensation		91		69
Other		9		17
Gross deferred tax assets		3,856		3,809
Deferred tax liabilities:
Accrued pension liability		1,029		1,044
Depreciation		656		619
Deferred loan fees and costs		555		461
Lease right-of-use asset		317		—
Intangible assets		260		215
Business combination adjustments		137		68
Other		51		53
Gross deferred tax liabilities		3,005		2,460
Net deferred tax asset	$	851	$	1,349

In accordance with relevant accounting guidance, the Corporation determined that it was

not

required to establish a valuation allowance for deferred tax assets since it is more likely than

not

that the deferred tax asset will be realized through future taxable income, future reversals of existing taxable temporary differences and tax strategies. The Corporation’s net deferred tax asset or liability is recorded in the consolidated financial statements as a component of other assets or other liabilities.

December

31,

2019

and

December

31,

2018,

the Corporation had

unrecognized tax benefits. The Corporation does

not

expect the total amount of unrecognized tax benefits to significantly increase within the next

twelve

months. The Corporation recognizes interest and penalties on unrecognized tax benefits in income taxes expense in its Consolidated Statements of Income.

The Corporation and the Bank are subject to U.S. federal income tax, a capital-based franchise tax in the Commonwealth of Pennsylvania as well as a corporate income tax in West Virginia based on earnings derived from business activity in the state. The Corporation and the Bank are

longer subject to examination by taxing authorities for years before

2016.