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

(In thousands)	2018			2017		2016
Federal:
Current (benefit)/expense	$	(7,046	)	$	1,559	$	13,207
Deferred expense		16,908			13,922		486
State:
Current expense		3,554			2,133		2,105
Deferred expense		134			196		466
Total income tax expense	$	13,550		$	17,810	$	16,264

Total income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 21 percent for 2018 and 35 percent for both 2017 and 2016, respectively, to income before taxes as a result of the following:

(In thousands)	2018			2017			2016
Computed “expected” tax expense	$	12,121		$	19,008		$	14,959
(Decrease)/increase in taxes resulting from:
Tax-exempt income		(402	)		(584	)		(496	)
State income taxes		2,942			1,514			1,671
Bank owned life insurance income		(290	)		(475	)		(492	)
Life insurance expense		148			479			297
Gain on death benefit		(630	)		—			—
Interest disallowance		115			124			95
Meals and entertainment expense		25			76			77
Stock-based compensation		(481	)		(982	)		15
Tax reform impact		—			(1,648	)		—
Other		2			298			138
Total income tax expense	$	13,550		$	17,810		$	16,264

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)	2018			2017
Deferred tax assets:
Allowance for loan losses	$	10,537		$	9,972
Tax net operating loss carryforward		7,046			—
Lease adjustment		—			49
Post-retirement benefits		—			297
Organization costs		13			14
Unrealized loss on securities available for sale		969			714
Unrealized loss on equity security		79			—
Stock plan		1,534			118
Nonaccrual interest		31			31
Accrued compensation		189			900
Capital leases		1,051			774
Total gross deferred tax assets	$	21,449		$	12,869
Deferred tax liabilities:
Lease financing	$	33,191		$	10,091
Cash flow hedge		265			392
Deferred loan origination costs and fees		1,214			1,072
Deferred income		2,693			729
Investment securities, principally due to the accretion of bond discount		—			13
Other		115			20
Total gross deferred tax liabilities		37,478			12,317
Net deferred tax (liability)/asset	$	(16,029	)	$	552

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, 2018 and 2017, the Company had no unrecognized tax benefits. The Company does not expect the amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months. The Company had Federal tax net operating losses arising in 2018 related to accelerated depreciation on lease financing activity of approximately $34 million and may be carried forward indefinitely. These losses cannot be carried back.

On December 22, 2017, the Tax Cuts and Jobs Act (H.R. 1) (the “Act”) was signed into law. The Act contains several changes in existing tax law impacting businesses, including a reduction in the Federal corporate income tax rate from 35 percent to 21 percent, effective January 1, 2018. As a result, the Company’s effective tax rate was 23.5 percent for 2018 as compared to 32.8 percent for 2017. The Company determined a reduction in the value of its net deferred tax liability of approximately $1.6 million, which was a result of a reduction in the Federal corporate tax rate that is expected to apply to the reversal of the Company’s temporary differences. The Company recorded the reduction in the deferred tax liability as an income tax benefit in the Company’s statement of income in 2017. The tax benefit was net of tax expense of $215 thousand related to the other comprehensive income revaluation adjustment.

On July 1, 2018, the 2019 New Jersey Budget (“Budget”) was passed which established a 2.5 percent surtax on businesses that have New Jersey allocated net income in excess of $1.0 million. The surtax is effective as of January 1, 2018 and will continue through 2019. The surtax will adjust to 1.5 percent for 2020 and 2021. In addition, effective for taxable years beginning on or after January 1, 2019, banks will be required to file combined reports of taxable income including their parent holding company, their real estate investment trust (“REIT”) subsidiary and all other subsidiaries including those that qualify as New Jersey Investment Companies, and Delaware Investment Holding Companies.

The Company is subject to U.S. Federal income tax as well as income tax of various state jurisdictions. The Company is no longer subject to federal examination for tax years prior to 2015. The tax years of 2015, 2016 and 2017 remain open to federal examination. The Company is no longer subject to state and local examinations by tax authorities for tax years prior to 2014. The tax years of 2014, 2015, 2016 and 2017 remain open for state examination.