Income Taxes

12 Months Ended

Dec. 31, 2018

Note 10.

Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and the Commonwealth of Virginia.

The components of the net deferred tax assets included in other assets at December 31, 2018 and 2017 are as follows:

(In thousands)	2018		2017
Deferred tax assets:
Allowance for loan losses	$	1,087	$	1,070
Securities available for sale	228		9
Impairment on securities	93		317
Interest on nonaccrual loans	143		166
Accrued vacation	73		75
SERP obligation	509		542
OREO	219		219
Accumulated depreciation	51		53
Restricted stock	92		58
Other	209		201
		2,704		2,710
Deferred tax liabilities:
Other	54		14
Net deferred tax assets	$	2,650	$	2,696

The Company has not recorded a valuation allowance for deferred tax assets as management feels it is more likely than not, that they will be ultimately realized.

Allocation of federal income taxes between current and deferred portions is as follows:

	Year Ended December 31,
(In thousands)	2018		2017		2016
Current tax expense	$	525	$	1,523	$	708
Deferred taxes		221		1,356		229
	$	746	$	2,879	$	937

The reasons for the difference between the statutory federal income tax rate and the effective tax rates for the years ended December 31, 2018, 2017 and 2016 are summarized as follows:

(In thousands)	2018			2017			2016
Computed “expected” tax expense (benefit)	$	1,445		$	1,828		$	1,568
Impact of the Tax Cuts and Jobs Act		-			1,687			-
Changes in income taxes resulting from:
Tax-exempt interest income		(149	)		(254	)		(242	)
Tax credits		(504	)		(422	)		(402	)
Other		(46	)		40			13
	$	746		$	2,879		$	937

The Tax Cuts and Jobs Act (the “Tax Act”) of 2017, which was signed into law on December 22, 2017, permanently reduced the federal corporate income tax rate to 21% from the prior maximum rate of 35%, effective January 1, 2018. In the year ended December 31, 2017, as a result of the reduction of the federal corporate income tax rate, the Company recorded a one-time remeasurement adjustment to its net federal deferred tax asset of $1.7 million, which was recognized in income tax expense.