Entity information:
NOTE
10
- INCOME TAXES
 
The components
of income tax expense are as follows for the years ended
December 31:
 
   
2017
    
2016
  
   
(In Thousands)
  
Current:
                
Federal
   $
722
     $
392
  
State
    
36
      
2
  
Current income tax expense
    
758
      
394
  
                 
Deferred:
                
Federal
    
95
      
(117
 )
Federal- Revaluation of net deferred taxes due to a change in tax rate
    
151
      
-
  
Deferred income tax expense (benefit)    
246
      
(117
 )
Total income tax expense
   $
1,004
     $
277
  
 
The reasons for the differences between the statutory federal income tax rate
s and the effective tax rates are summarized as follows for the years ended
December 31:
 
 
   
2017
    
2016
  
   
% of
    
% of
  
   
Income
    
Income
  
Federal income tax at statutory rates
    
34.0
%
    
34.0
%
Increase (decrease) in tax resulting from:
                
Tax-exempt income
    
(10.9
 )    
(20.1
 )
Tax rate change
    
4.5
      
-
  
Other
    
2.3
      
1.8
  
Effective tax rates
    
29.9
%
    
15.7
%
 
The Company had gross deferred tax assets and gross deferred tax liabilities as follows as of
December 31:
 
   
2017
    
2016
  
   
(In Thousands)
  
Deferred tax assets:
                
Allowance for loan losses
   $
816
     $
1,199
  
Deferred compensation
    
212
      
305
  
Write-down of securities
    
11
      
16
  
Restricted stock awards
    
10
      
27
  
Charitable contribution carryover
    
15
      
104
  
Alternative minimum tax carryforward
    
541
      
707
  
Net unrealized holding loss on available-for-sale securities
    
118
      
290
  
Other
    
103
      
120
  
Gross deferred tax assets
    
1,826
      
2,768
  
                 
Deferred tax liabilities:
                
Depreciation
    
(273
 )    
(469
 )
Deferred loan costs/fees
    
(274
 )    
(490
 )
Mortgage servicing rights
    
(494
 )    
(679
 )
Gross deferred tax liabilities
    
(1,041
 )    
(1,638
 )
Net deferred tax asset (included in other assets)
   $
785
     $
1,130
  
 
 
On
December 22, 2017,
the U.S. federal government enacted the Tax Cuts and Jobs Act. Among other provisions, the Tax Cuts and Jobs Act reduces the historical corporate income tax rate to a newly enacted rate of
21
percent for tax years beginning after
December 31, 2017.
As of the date the new legislation was enacted, under ASC
740,
Income Taxes, the Company was required to recognize the effects of the change in tax law and rates on its deferred tax assets and liabilities as a charge to income tax expense. As a result of the Tax Cuts and Jobs Act and the revaluation of deferred tax assets and liabilities at
December 31, 2017,
the Company recognized an additional income tax expense of
$151
thousand in
2017.
 
Deferred ta
x
assets as of
December 31, 2017
and
2016
have
not
been reduced by a valuation allowance because management believes that it is more likely than
not
that the full amount of deferred taxes will be realized.
 
As of
December 31, 2017
and
2016,
the Company had
no
operating loss carryovers for income tax purposes.
 
It is the Company
’s policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than
not
to be sustained upon examination by tax authorities. As of
December 31, 2017
and
2016,
there were
no
material uncertain tax positions related to federal and state income tax matters. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and state taxing authorities for the years ended
December 31,
2014
through
December 31,
2017
.
 
In
January
of
2011,
the Bank formed a subsidiary Passive Investment Company (PIC). Under State of Connecticut statutes, such a company is
not
subject to Connecticut corporation business taxes. Provided that the Bank meets the mandated statutory requirements, the Company
’s Connecticut corporation business taxes are significantly reduced or eliminated.