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INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
For the years ended December 31, 2022 and 2021, income tax expense attributable to income from operations consisted of the following (in thousands):
20222021
Current expense:
Federal$5,501 $5,732 
State883 1,033 
Total current6,384 6,765 
Deferred expense/(benefit):
Federal1,365 527 
State357 43 
Total deferred1,722 570 
Income tax expense$8,106 $7,335 

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):
 20222021
Statutory federal tax rate21 %21 %
Tax computed at statutory rate$7,747 $7,090 
Increase (reduction) resulting from:
Tax-exempt income(434)(380)
831(b) premium adjustment(309)(291)
Dividend exclusion(7)(8)
State taxes, net of Federal impact988 803 
Nondeductible interest expense8 4 
Other items, net113 117 
Income tax expense$8,106 $7,335 
Effective tax rate22.0 %21.7 %
The higher tax expense in 2022 when compared to 2021 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, 2022 and 2021, are presented below (in thousands):
 20222021
Deferred tax assets:
Allowance for loan losses$5,147 $5,546 
Depreciation1,133 979 
Deferred compensation and directors' fees1,128 1,130 
Operating lease liabilities1,688 1,976 
Purchase accounting adjustment – fixed assets153 153 
Net unrealized losses on securities available for sale25,310 886 
Defined benefit pension and other benefit plans1,320 1,347 
Nonaccrued interest415 473 
Accrued expense117 139 
Other items, net112 127 
Total gross deferred tax assets36,523 12,756 
Deferred tax liabilities:
Deferred loan fees and costs1,358 355 
Prepaid pension4,055 3,715 
Discount accretion108 78 
Core deposit intangible1,733 1,556 
REIT dividend561 608 
Operating lease right-of-use assets1,688 1,976 
Accrual for employee benefit plans5 3 
Other219 344 
Total gross deferred tax liabilities9,727 8,635 
Net deferred tax asset$26,796 $4,121 

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, 2022 and 2021, 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, 2022 and 2021, 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 2019 and for New York State taxing authorities for the year prior to 2019. New York State taxing authorities recently completed audits of the Corporation for the years 2018, 2019, and 2020. There were no adjustments as a result of the New York State audits.