Entity information:
Income Taxes
The provision (benefit) for income taxes for the years ended December 31, 2017, 2016 and 2015 consists of the following (in thousands):
 
 
For the Year Ended December 31,
 
 
2017
 
2016
 
2015
Current
 
 
 
 
 
 
Federal
 
$
(12,754
)
 
$
6,259

 
$
8,378

State
 
169

 
96

 
1,064

Total current
 
(12,585
)
 
6,355

 
9,442

Deferred
 
 
 
 
 
 
Federal
 
35,440

 
5,798

 
1,349

State
 
—

 
—

 
92

Total deferred
 
35,440

 
5,798

 
1,441

 
 
$
22,855

 
$
12,153

 
$
10,883


Included in other comprehensive income is income tax expense attributable to the net accretion of unrealized losses on securities available-for-sale arising during the year in the amount of $276,000, $330,000, and $600,000 for the years ended December 31, 2017, 2016 and 2015, respectively. Effective January 1, 2017, the Company adopted ASU 2016-09 “Compensation - Stock Compensation,” which decreased income tax expense by $1.8 million for the year ended December 31, 2017. Under the ASU, the tax benefits of exercised stock options and vested stock awards are recognized as a benefit to income tax expense in the reporting period which they occur. Prior to the adoption of the ASU, included in stockholders’ equity is income tax benefit attributable to stock plans in the amount of $62,000, and $32,000 for the years ended December 31, 2016, and 2015, respectively.
A reconciliation between the provision for income taxes and the expected amount computed by multiplying income before the provision for income taxes times the applicable statutory Federal income tax rate for the years ended December 31, 2017, 2016 and 2015 is as follows (in thousands):
 
 
For the Year Ended December 31,
 
 
2017
 
2016
 
2015
Income before provision for income taxes
 
$
65,325

 
$
35,199

 
$
31,205

Applicable statutory Federal income tax rate
 
35.0
%
 
35.0
%
 
35.0
%
Computed “expected” Federal income tax expense
 
$
22,864

 
$
12,320

 
$
10,922

(Decrease) increase in Federal income tax expense resulting from
 
 
 
 
 
 
Tax exempt interest
 
(839
)
 
(390
)
 
(291
)
ESOP fair market value adjustment
 
223

 
131

 
111

ESOP dividends
 
(230
)
 
(223
)
 
(234
)
Earnings on BOLI
 
(1,155
)
 
(781
)
 
(525
)
Merger related expenses
 
478

 
1,005

 
132

State income taxes net of Federal benefit
 
110

 
62

 
751

Stock compensation
 
(1,823
)
 
—

 
—

Impact of Tax Cuts and Jobs Act (“Tax Reform”)
 
3,643

 
—

 
—

Other items, net
 
(416
)
 
29

 
17

 
 
$
22,855

 
$
12,153

 
$
10,883



The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2017 and 2016 are presented in the following table (in thousands):
 
 
December 31,
 
 
2017
 
2016
Deferred tax assets:
 
 
 
 
Allowance for loan losses
 
$
3,311

 
$
6,269

Reserve for repurchased loans
 
97

 
346

Reserve for uncollected interest
 
49

 
70

Incentive compensation
 
—

 
1,695

Deferred compensation
 
519

 
1,549

Other reserves
 
115

 
375

Stock plans
 
864

 
2,151

ESOP
 
126

 
224

Purchase accounting adjustments
 
3,436

 
16,905

Net operating loss carryforward related to acquisition
 
3,741

 
5,829

Other real estate owned
 
170

 
26

Unrealized loss on securities
 
1,898

 
5,211

 Federal and state alternative minimum tax
 
2,451

 
2,220

Total gross deferred tax assets
 
16,777

 
42,870

Deferred tax liabilities:
 
 
 
 
Incentive compensation
 
(127
)
 
—

Excess servicing on sale of mortgage loans
 
(28
)
 
(76
)
Investments, discount accretion
 
(244
)
 
(434
)
Deferred loan and commitment costs, net
 
(1,119
)
 
(1,261
)
Premises and equipment, differences in depreciation
 
(373
)
 
(52
)
Undistributed REIT income
 
(12,322
)
 
(2,167
)
Other
 
(642
)
 
—

Total gross deferred tax liabilities
 
(14,855
)
 
(3,990
)
Net deferred tax assets
 
$
1,922

 
$
38,880


The Company has Federal net operating losses from the acquisitions of Colonial American and Cape. At both December 31, 2017 and 2016, the net operating losses from Colonial American were $5.9 million. These net operating losses are subject to annual limitation under Code Section 382 in the amount of approximately $330,000 and will expire between 2029 and 2034. At both December 31, 2017 and 2016, the net operating losses from Cape were $10.5 million. These net operating losses are subject to annual limitation under Code Section 382 of approximately $4.5 million, and will expire between 2020-2023.
As of December 31, 2017 and 2016, the Company had $1.8 million of New Jersey AMA Tax Credits. These credits do not expire. As of December 31, 2017 and 2016, the Company had $1.0 million of AMT Tax Credits that were part of the Cape acquisition. These credits are subject to the same Code Section 382 limitation as indicated above but do not expire.
At December 31, 2017, 2016 and 2015, the Company determined that it is not required to establish a valuation reserve for the remaining net deferred tax assets since it is “more likely than not” that the net deferred tax assets will be realized through future reversals of existing taxable temporary differences, future taxable income and tax planning strategies. The conclusion that it is “more likely than not” that the remaining net deferred tax assets will be realized is based on the history of earnings and the prospects for continued growth. Management will continue to review the tax criteria related to the recognition of deferred tax assets.
Retained earnings at December 31, 2017 includes approximately $10.8 million for which no provision for income tax has been made. This amount represents an allocation of income to bad debt deductions for tax purposes only. Events that would result in taxation of these reserves include failure to qualify as a bank for tax purposes, distributions in complete or partial liquidation, stock redemptions and excess distributions to stockholders. At December 31, 2017, the Company had an unrecognized deferred tax liability of $2.3 million with respect to this reserve.
There were no unrecognized tax benefits for the years ended December 31, 2017, 2016 and 2015. The tax years that remain subject to examination by the Federal government and the state of New York include the years ended December 31, 2014 and forward. The tax years that remain subject to examination by the state of New Jersey include the years ended December 31, 2013 and forward.
With the enactment of the Tax Reform on December 22, 2017, the federal corporate income tax rate was reduced from 35% to 21% effective January 1, 2018. Accounting guidance requires that the effect of income tax law changes on deferred taxes should be recognized as a component of income tax expense related to continuing operations, but also to items initially recognized in other comprehensive income. As a result of the reduction in the U. S. federal statutory income tax rate, the Company recognized an additional income tax expense of $3.6 million for the year ended December 31, 2017. Because accounting guidance requires the effect of income tax law changes on deferred taxes to be recognized as a component of income tax expense related to continuing operations, this additional income tax expense included $1.8 million related to items recognized in other comprehensive income. These amounts will continue to be reported as separate components of accumulated other comprehensive income until such time as the underlying transactions from which such amounts arose are settled through continuing operations. At such time, the reclassification from accumulated other comprehensive income will be recognized as a net tax benefit.