Income Taxes

9 Months Ended

Sep. 30, 2019

The income tax expense included in the accompanying consolidated statements of income consists of the following (in thousands):



	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019			2018
Current income tax expense	$	3,807		$	95	$	10,371		$	3,107
Deferred income tax (benefit) expense	(146		)	2,097		(4		)	4,535
Income tax expense	$	3,661		$	2,192	$	10,367		$	7,642

The net deferred tax liability totaled $8.0 million at September 30, 2019 as compared to a net deferred tax asset of $9.8 million at December 31, 2018. No valuation allowance was recorded at September 30, 2019 or December 31, 2018, as management believes it is more likely than not that all of the deferred tax asset items will be realized in future years. Unrecognized tax benefits were not material at September 30, 2019 or December 31, 2018.

We recognized income tax expense of $3.7 million and $10.4 million, for an effective tax rate (“ETR”) of 15.6% and 15.3% for the three and nine months ended September 30, 2019, respectively, compared to income tax expense of $2.2 million and $7.6 million, for an ETR of 9.7% and 11.9%, for the three and nine months ended September 30, 2018, respectively. The higher ETR for the three and nine months ended September 30, 2019 was mainly due to a discrete tax benefit recorded in 2018 of approximately $800,000 associated with the remeasurement of the net deferred tax asset and a decrease in tax-exempt income as a percentage of pre-tax income for the three and nine months ended September 30, 2019. The benefit recorded in 2018 associated with the remeasurement lowered the ETR by 3.6% and 1.2% for the three and nine months ended September 30, 2018, respectively. The ETR differs from the stated rate of 21% for the three and nine months ended September 30, 2019 and 2018 primarily due to the effect of tax-exempt income from municipal loans and securities, as well as bank owned life insurance. We file income tax returns in the U.S. federal jurisdictions and in certain states. We are no longer subject to U.S. federal income tax examinations by tax authorities for years before 2016 or Texas state tax examinations by tax authorities for years before 2015.