Entity information:
NOTE 18 – INCOME TAXES

The Company and its subsidiary are subject to U.S. federal and state income tax.  The components of income tax expense for the years ended December 31, 2017 and 2016 are as follows:
(Dollars in thousands)
2017
 
2016
Current:
 
 
 
Federal
$
2,859

 
$
2,175

State
983

 
644

 
3,842

 
2,819

Deferred:
 
 
 
Federal
741

 
(40
)
State
(104
)
 
49

 
637

 
9

 
$
4,479

 
$
2,828


The reconciliation of the statutory federal income tax at a rate of 34% to the income tax expense included in the statements of income and comprehensive income for the years ended December 31, 2017 and 2016 is as follows:
(Dollars in thousands)
2017
 
2016
Federal income tax at statutory rate
$
3,458

 
34
 %
 
$
2,840

 
34
 %
Tax exempt interest
(438
)
 
(4
)
 
(288
)
 
(3
)
State income tax, net of federal income tax effect
580

 
6

 
457

 
5

Rate change impact
942

 
9

 
—

 
—

Bank owned life insurance
(178
)
 
(2
)
 
(105
)
 
(1
)
M&A expenses
263

 
3

 
—

 
—

Other
(148
)
 
(2
)
 
(76
)
 
(1
)
 
$
4,479

 
44
 %
 
$
2,828

 
34
 %

 
The components of the net deferred tax asset at December 31, 2017 and 2016 are as follows:
(Dollars in thousands)
2017
 
2016
Deferred tax assets:
 
 
 
Allowance for loan losses
$
2,016

 
$
2,646

Deferred compensation
357

 
506

Deferred Fees
3

 
402

Foreclosed real estate
186

 
223

Restricted stock
188

 
122

Unrealized loss on securities available for sale
—

 
497

Other
468

 
223

Total deferred tax assets
3,218

 
4,619

Deferred tax liabilities:
 
 
 
Depreciation
(448
)
 
(537
)
Prepaid expenses
(32
)
 
(210
)
Unrealized gain on securities, available for sale
(122
)
 
—

Unrealized gain on interest rate swaps
(391
)
 
(659
)
Total deferred tax liabilities
(993
)
 
(1,406
)
Net deferred tax asset, included in other assets
$
2,225

 
$
3,213



On December 22, 2017, H.R.1, commonly known as the Tax Cuts and Jobs Act (the “Act”) was signed into law.  The Act contains several changes in existing law impacting businesses, including the reduction of the Federal Corporate income tax rate from 34% to 21%, effective January 1, 2018. As a result of the rate reduction, the Company re-measured its deferred tax assets using the newly enacted corporate tax rate through income tax expense in the period of enactment. The Company’s re-measurement of its net deferred tax asset resulted in additional income tax expense of $942 thousand at December 31, 2017.