Allocation of federal and state income taxes between current and deferred portions is as follows:

 

		Years Ended December 31,
		2017			2016
		(In thousands)
Current tax provision:
Federal		$	2,608		$	1,459
State			716			409
			3,324			1,868
Deferred tax provision (benefit):
Federal			(572)			(25)
State			(167)			(5)
Effect of federal tax rate change			979			—
			240			(30)
Total tax provision		$	3,564		$	1,838

 

The reasons for the differences between the statutory federal income tax rate and the effective tax rates are summarized as follows:

 

		Years Ended December 31,
		2017			2016
Statutory tax rate			34.0	%		34.0	%
Increase (decrease) resulting from:
State taxes, net of federal tax benefit			5.4			5.6
Income on bank-owned life insurance			(1.2)			(1.6)
Tax exempt bond income			(1.5)			(1.6)
Share-based compensation			0.3			1.7
Effect of federal tax rate change			14.5			—
Other, net			1.3			0.4
Effective tax rates			52.8	%		38.5	%

 

On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act (the “Act”). The Act includes a number of changes in existing tax law impacting businesses including, among other things, a reduction in the corporate income tax rate from 34% to 21%, effective on January 1, 2018. As a result of this rate reduction, the Company revalued its net deferred tax asset as of December 22, 2017, resulting in a reduction in the value of the net deferred tax asset of $979 thousand, which was recorded as additional income tax provision in the Company’s consolidated statements of comprehensive income in 2017. The Company has developed a reasonable estimate of the other provisions of the Act in determining the current year income tax provision.

 

The $979 thousand in income tax provision includes a tax provision of $7 thousand relating to the impact of the rate change on deferred tax items originally recorded through other comprehensive income. This accounting treatment effectively stranded $7 thousand of deferred tax items in accumulated other comprehensive income (“AOCI”). In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows a reclassification from AOCI to retained earnings to eliminate the stranded tax effects resulting from the Act. As permitted, the Company early adopted the ASU and recorded a $7 thousand decrease in retained earnings and a corresponding increase in AOCI as of January 1, 2018.

 

The tax effects of each item that gives rise to deferred tax assets (liabilities) are as follows:

 

		December 31,
		2017			2016
		(In thousands)
Deferred tax assets:
Allowance for loan losses		$	1,730		$	2,169
Employee benefit plans			847			967
Partnerships and other investments			3			—
Deferred loan fees			—			5
Net unrealized gain/loss on securities available for sale			2			145
Other, net			15			—
			2,597			3,286
Deferred tax liabilities:
Depreciation and amortization			(194)			(463)
Mortgage servicing rights			(29)			(49)
Partnerships and other investments			—			(14)
Deferred loan fees			(22)			—
Other, net			—			(18)
			(245)			(544)
Net deferred tax asset		$	2,352		$	2,742