FEDERAL INCOME TAXES (Tables)

6 Months Ended

Jun. 30, 2019

Income tax expense was as follows (dollars in thousands):

	Three Months Ended June 30, 2019		Three Months Ended June 30, 2018		Six Months Ended June 30, 2019		Six Months Ended June 30, 2018
Current	$	1,851	$	1,294	$	3,319	$	2,232
Deferred		65		140		311		427
	$	1,916	$	1,434	$	3,630	$	2,659

Difference between Financial Statement Tax Expense and Amount Computed by Applying Statutory Federal Tax Rate to Pretax Income

The difference between the financial statement tax expense and amount computed by applying the statutory federal tax rate to pretax income was reconciled as follows (dollars in thousands):

	Three Months Ended June 30, 2019			Three Months Ended June 30, 2018			Six Months Ended June 30, 2019			Six Months Ended June 30, 2018
Statutory rate		21	%		21	%		21	%		21	%
Statutory rate applied to income before taxes	$	2,083		$	1,714		$	4,049		$	3,180
Deduct
Tax-exempt interest income		(173	)		(183	)		(340	)		(362	)
Bank-owned life insurance		(52	)		(50	)		(102	)		(100	)
Other, net		58			(47	)		23			(59	)
	$	1,916		$	1,434		$	3,630		$	2,659

Deferred Tax Assets and Liabilities

The net deferred tax asset recorded included the following amounts of deferred tax assets and liabilities (dollars in thousands):

	June 30, 2019			December 31, 2018
Deferred tax assets
Allowance for loan losses	$	3,546		$	3,544
Nonaccrual loan interest		209			268
Valuation allowance on other real estate owned		184			218
Unrealized loss on securities available for sale		—			606
Other		237			302
Gross deferred tax assets		4,176			4,938
Valuation allowance		(92	)		(92	)
Total net deferred tax assets		4,084			4,846
Deferred tax liabilities
Depreciation		(1,139	)		(1,005	)
Prepaid expenses		(200	)		(200	)
Unrealized gain on securities available for sale		(357	)		—
Other		(281	)		(261	)
Gross deferred tax liabilities		(1,977	)		(1,466	)
Net deferred tax asset	$	2,107		$	3,380