Income Taxes

The components of the provision for income taxes for the years ended December 31, were as follows:



	2019		2018
	(Dollars in thousands)
Current federal tax provision	$	1,351	$	1,695
Current state tax provision	41		86
Deferred tax provision (benefit)	438		(508		)
	$	1,830	$	1,273

The termination of Union’s Defined Benefit Pension Plan resulted in a deferred tax benefit and a reduction in the provision for income taxes of $900 thousand with the settlement of all assets and liabilities under the Plan for the year ended December 31, 2018. As a result of the 2017 Tax Act, the federal tax rate decreased from 34% to 21% effective January 1, 2018. The deferred tax provision and provision for income taxes shown above were impacted by a one-time charge of $32 thousand for the year ended December 31, 2018 for the revaluation of the Company's deferred tax assets to reflect the 21% tax rate for future periods.

The total provision for income taxes differs from the amounts computed at the statutory federal income tax rate of 21% primarily due to the following for the years ended December 31:



	2019			2018
	(Dollars in thousands)
Computed “expected” tax expense	$	2,620		$	1,752
State taxes	32			68
Tax exempt interest	(513		)	(413		)
Increase in cash surrender value of COLI	(59		)	(103		)
Tax credits	(857		)	(684		)
Equity in losses of limited partnerships	640			528
Non-deductible expenses	46			36
True-up adjustment for effect of enacted tax law changes	—			32
Other	(79		)	57
	$	1,830		$	1,273

Listed below are the significant components of the net deferred tax (liability) asset at December 31:



	2019			2018
	(Dollars in thousands)
Components of the deferred tax asset
Bad debts	$	1,329		$	1,244
Deferred compensation	227			205
Core deposit intangible	106			94
Unrealized loss on investment securities available-for-sale	—			272
Other	69			38
Total deferred tax asset	1,731			1,853

Components of the deferred tax liability
Depreciation	(1,402		)	(913		)
Mortgage servicing rights	(371		)	(360		)
Limited partnership investments	(50		)	(16		)
Unrealized gain on investment securities available-for-sale	(262		)	—
Goodwill	(276		)	(244		)
Prepaid expenses	(136		)	(114		)
Total deferred tax liability	(2,497		)	(1,647		)
Net deferred tax (liability) asset	$	(766	)	$	206

Deferred tax assets are recognized subject to management's judgment that it is more likely than not that the deferred tax asset will be realized. Based on the temporary taxable items, historical taxable income and estimates of future taxable income, the Company believes that it is more likely than not that the deferred tax assets at December 31, 2019 will be realized and therefore no valuation allowance is warranted.

The net deferred income tax liability is included in Accrued interest and other liabilities and the net deferred income tax asset is included in Other assets in the consolidated balance sheets at December 31, 2019 and 2018, respectively.

Based on management's evaluation, management has concluded that there were no significant uncertain tax positions requiring recognition in the Company's financial statements at December 31, 2019 and 2018. The Company is subject to income tax at the federal level and in the state of New Hampshire. Although the Company is not currently the subject of an examination by taxing authorities, the Company's tax years ended December 31, 2016 through 2018 are open to examination under the applicable statute of limitations. The 2019 tax return has not yet been filed.

The Company may from time to time be assessed interest and/or penalties by federal or state tax jurisdictions, although any such assessments historically have been minimal and immaterial to the Company's financial results. In the event that the Company receives an assessment for interest and/or penalties, it will be classified in the financial statements as Other expenses.