INCOME TAXES

The following table summarizes the current and deferred components of income tax expense (benefit) for each of the years ended December 31, 2019, 2018 and 2017:



(in thousands)	2019		2018			2017
Current:
Federal tax expense	$	2,639	$	6,775		$	8,705
State tax expense	550		1,230			1,039
Total current tax expense	3,189		8,005			9,744

Deferred tax expense	1,020		(443		)	2,898
Impact of federal tax reform enactment	—		—			3,988
Total income tax expense	$	4,209	$	7,562		$	16,630

The following table reconciles the expected federal income tax expense (computed by applying the federal statutory tax rate of 21%, 35% for years prior to 2018) to recorded income tax expense for the years ended December 31, 2019, 2018 and 2017:



	2019					2018					2017
(in thousands, except ratios)	Amount			Rate		Amount			Rate		Amount			Rate
Statutory tax rate	$	5,633		21.00	%	$	8,505		21.00	%	$	14,918		35.00	%
Increase (decrease) resulting from:
State taxes, net of federal benefit	547			2.04		908			2.24		986			2.31
Tax exempt interest	(1,375		)	(5.13	)	(1,315		)	(3.25	)	(2,074		)	(4.87	)
Federal tax credits	(282		)	(1.05	)	(125		)	(0.31	)	(130		)	(0.3	)
Officers' life insurance	(431		)	(1.61	)	(382		)	(0.94	)	(538		)	(1.26	)
Acquisition costs	—			—		—			—		89			0.21
Stock-based compensation plans	(20		)	(0.07	)	(120		)	(0.3	)	(241		)	(0.57	)
Impact of federal tax reform enactment	—			—		—			—		3,988			9.36
Other	137			0.51		91			0.23		(368		)	(0.86	)
Effective tax rate	$	4,209		15.69	%	$	7,562		18.67	%	$	16,630		39.02	%

The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 31, 2019 and 2018 are summarized below. The net deferred tax asset, which is included in other assets, amounted to $3.9 million at December 31, 2019 and $9.5 million at December 31, 2018.

The significant components of deferred tax assets and liabilities at December 31, 2019 and December 31, 2018 were as follows:



	2019				2018
(in thousands)	Assets		Liabilities		Assets		Liabilities
Allowance for loan losses	$	3,507	$	—	$	3,085	$	—
Deferred compensation	3,383		—		3,242		—
Unrealized gain or loss on securities available for sale	—		1,858		2,641		—
Unrealized gain or loss on derivatives	307		—		685		—
Depreciation	—		1,722		—		1,517
Deferred loan origination costs	—		862		—		725
Non-accrual interest	381		—		374		—
Branch acquisition costs and goodwill	—		712		—		784
Core deposit intangible	—		1,231		—		1,309
Acquisition fair value adjustments	2,223		—		3,171		—
Prepaid expenses	—		311		—		215
Interest rate cap premium amortization	—		—		—		257
Mortgage servicing rights	—		703		—		721
Equity compensation	468		—		335		—
Prepaid pension	—		359		—		366
Contract incentives	1,167		—		1,658		—
Right of use asset	—		2,253		—		—
Lease liability	2,273		—		—		—
Other	160		—		217		—
Total	$	13,869	$	10,011	$	15,408	$	5,894

The Company has determined that a valuation allowance is not required for its net deferred tax asset since it is more likely than not that this asset is realizable principally through future taxable income and future reversal of existing temporary differences.

The Company is subject to income tax in the U.S. federal jurisdiction and also in the states of Maine, New Hampshire and Massachusetts. The Company is no longer subject to examination by taxing authorities for years before 2016.

On December 22, 2017, H.R.1, commonly known as the Tax Cuts and Jobs Act (the “Act”), was signed into law. The Act included several provisions affecting the Company's federal income tax expense, including the reduced federal income tax rate from 35% to 21% effective January 1, 2018. As a result of this rate reduction, the Company was required to re-measure, through income tax expense in the period of enactment, the deferred tax assets and liabilities using the enacted rate at which these items are expected to be recovered or settled. The re-measurement of the Company's net deferred tax asset resulted in additional 2017 income tax expense of $4.0 million.