INCOME TAXES

The Company files a consolidated federal income tax return with its subsidiaries. Deferred tax assets and liabilities are determined using the liability (or balance sheet) method which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. If it is more likely than not that some portion or the entire deferred tax asset will not be realized, deferred tax assets will be reduced by a valuation allowance. It is the Company’s policy to recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense.



(dollars in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in thousands)	2019			2018			2019			2018
Current income tax expense	$	1,716		$	1,606		$	4,746		$	3,065
Deferred income tax expense (benefit)	(319		)	(165		)	(639		)	(263		)
Income tax expense as reported	$	1,397		$	1,441		$	4,107		$	2,802

Effective tax rate	27.4		%	27.2		%	26.8		%	27.4		%

Net deferred tax assets totaled $6.0 million at September 30, 2019 and $6.7 million at December 31, 2018. No valuation allowance for deferred tax assets was recorded at September 30, 2019 as management believes it is more likely than not that deferred tax assets will be realized against deferred tax liabilities and projected future taxable income.

The effective income tax rates differed from the statutory federal and state income tax rates during 2019 and 2018, respectively, primarily due to the effect of merger related expenses, tax-exempt loans, life insurance policies, the income tax effects associated with stock-based compensation and certain non-deductible expenses for state income taxes.