10. INCOME TAXES

The income tax expense included in the consolidated financial statements for the years ended December 31, is allocated as follows:

(In thousands)	2015			2014			2013
Federal:
Current expense/(benefit)	$	13,035		$	10,251		$	2,811
Deferred (benefit)/expense		(3,210	)		(2,626	)		1,299
State:
Current expense/(benefit)		3,176			625			21
Deferred expense		(833	)		1,146			1,371
Total income tax expense	$	12,168		$	9,396		$	5,502

Total income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 35 percent to income before taxes as a result of the following:

(In thousands)	2015			2014			2013
Computed “expected” tax expense	$	11,249		$	8,500		$	5,167
(Decrease)/increase in taxes resulting from:
Tax-exempt income		(316	)		(152	)		(317	)
State income taxes		1,523			1,102			901
Bank owned life insurance income		(279	)		(152	)		(243	)
Interest disallowance		40			9			10
Meals and entertainment expense		69			69
Stock-based compensation		86			60			54
Rate adjustment		(70	)		—			(100	)
Other		(134	)		(40	)		(30	)
Total income tax expense	$	12,168		$	9,396		$	5,502

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31 are as follows:

(In thousands)	2015		2014
Deferred tax assets:
Allowance for loan losses	$	10,437	$	7,957
Valuation allowance for OREO losses		1,084		989
Federal and state net operating loss carryforward		6		9
Lease adjustment		122		149
Federal AMT credit carryforward		—		540
Post retirement benefits		445		427
Prepaid alternative minimum assessment		283		283
Contribution limitation		237		34
Charitable contribution carryforward		32		32
Organization costs		24		26
Cash flow hedge		544		69
Stock option expense		414		372
Nonaccrued interest		127		181
Accrued compensation		3,349		2,422
Capital leases		1,407		952
Total gross deferred tax assets	$	18,511	$	14,442
Deferred tax liabilities:
Bank premises and equipment, principally due to differences in depreciation	$	767	$	920
Unrealized gain on securities available for sale		262		835
Deferred loan origination costs and fees		1,114		1,555
Deferred income		721		603
Investment securities, principally due to the accretion of bond discount		29		19
Other		36		19
Total gross deferred tax liabilities		2,929		3,951
Net deferred tax asset	$	15,582	$	10,491

Based upon taxes paid and projected future taxable income, Management believes that it is more likely than not that the gross deferred tax assets will be realized.

At December 31, 2014 and 2013, the Company had no unrecognized tax benefits. The Company does not expect the amount of unrecognized tax benefits to significantly change in the next twelve months.

The Company is subject to U.S. Federal income tax as well as New Jersey income tax. The Company is no longer subject to federal examination for tax years prior to 2012. The tax years of 2012, 2013 and 2014 remains open to federal examination. The Company is no longer subject to New Jersey examination for tax years prior to 2011. The tax years of 2011, 2012, 2013 and 2014 remain open for state examination.