Entity information:
NOTE 7 — INCOME TAXES
Income tax expense consisted of the following for the years ended December 31, 2017, 2016 and 2015 (dollars in thousands):
     
Year Ended December 31,
  
(in thousands)
    
2017
    
2016
    
2015
  
Current                                      
Federal
       $ 7,920         $ 3,466         $ 2,873    
State and local
         2,499           492           141    
Total current
         10,419           3,958           3,014    
Deferred                                      
Federal
         1,045           (795)           (622)    
State and local
         (255)           (118)           167    
Total deferred
         790           (913)           (455)    
Total income tax expense
       $ 11,209         $ 3,045         $ 2,559    
 
 
Deferred tax assets and liabilities consist of the following (dollars in thousands):
     
At December 31,
  
     
2017
    
2016
  
Deferred tax assets:                          
Allowance for loan losses
       $ 4,583         $ 4,990    
Nonaccrual interest income
         28           159    
Off balance sheet reserves
         110           68    
Restricted stock
         153           165    
Tangible asset
         23           36    
Non-Qualified stock options
         183           251    
Unrealized loss on securities available for sale
         86           118    
Total gross deferred tax assets
         5,166           5,787    
Deferred tax liabilities:                          
Depreciation and amortization
         574           427    
Prepaid asset
         159           150    
Total gross deferred tax liabilities
         733           577    
Net deferred tax asset, included in other assets
       $ 4,433         $ 5,210    
 
The following is a reconciliation of the Company’s statutory federal income tax rate of 35% to its effective tax rate for the years ended December 31, 2017, 2016 and 2015 (dollars in thousands):
     
For the year ended December 31,
  
     
2017
    
2016
    
2015
  
     
Tax expense/ 
(benefit)
    
Rate
    
Tax expense/ 
(benefit)
    
Rate
    
Tax expense/ 
(benefit)
    
Rate
  
Pretax income at statutory rates
       $ 8,252           35.00%         $ 2,740           34.00%         $ 2,322           34.00%    
State and local taxes, net of federal income 
tax benefit
         1,459           6.19           247           3.10           204           3.00    
Nondeductible expenses
         21           0.09           19           0.20           13           0.20    
Stock options
         (113)           (0.48)           49           0.60           16           0.20    
Tax-exempt income, net
         (10)           (0.04)           (10)           (0.10)           —           —    
Impact of U.S. tax reform (the Tax Act)
         1,581           6.71           —           —           —           —    
Other
         19           0.08           —           —           4           0.10    
Effective income tax expense/rate
       $ 11,209           47.55%         $ 3,045           37.80%         $ 2,559           37.50%    
 
Metropolitan Bank Holding Corporation and the Bank file consolidated Federal, New York State and New York City tax returns in 2017, 2016 and 2015.
On December 22, 2017, the U.S. government enacted the Tax Act, which includes significant changes to the U.S. corporate income tax system including a federal corporate rate reduction from 35% to 21% and limitations on the deductibility of interest expense and executive compensation. The Tax Act resulted in a one-time U.S. tax expense of  $1.6 million. A majority of the provisions in the Tax Act are effective January 1, 2018.
As of December 31, 2017 and 2016 there are no unrecognized tax benefits, and the Company does not expect this to significantly change in the next twelve months.
The Company and its subsidiary are subject to U.S. federal income tax as well as income tax of the State and City of New York. The Company is no longer subject to examination by the U.S. federal and state or local tax authorities for years prior to 2014.