INCOME TAXES

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 10 INCOME TAXES

The Company files a consolidated federal income tax return. The following summarizes the provision for income taxes and the related deferred tax components for the years ended December 31, 2019 and 2018.

The source of pre-tax book income is summarized as follows for the years ended December 31:

(Dollars are in thousands)	2019		2018
Pre-tax book income
Domestic	$	2,581	$	1,068
Total pre-tax book income	$	2,581	$	1,068

Income tax expense is summarized as follows for the years ended December 31: 

(Dollars are in thousands)		2019		2018
Current income tax expense (benefit)
Federal	$	(35)	$	(45)
State	-		-
Total current income tax expense (benefit)		(35)		(45)

Deferred income tax expense
Federal		557		194
State	-		-
Total deferred income tax expense		557		194
Income tax expense	$	522	$	149

The following table summarizes the differences between the actual income tax expense and the amounts computed using the federal statutory tax rate of 21% for years ending December 31, 2019 and 2018, respectively:

(Dollars are in thousands)	2019			2018
Income tax expense (benefit) at the applicable federal rate	$	542		$	224
Permanent differences resulting from:
Nondeductible expenses		10			5
Tax exempt interest income		(11	)		(17	)
Bank owned life insurance		(13	)		(12	)
Other adjustments		(6	)		(51	)
Income tax expense	$	522		$	149

 The net deferred tax assets and liabilities resulting from temporary differences as of December 31 are summarized as follows:

(Dollars are in thousands)		2019		2018
Deferred Tax Assets
Allowance for loan losses	$	1,127	$	1,121
Deferred compensation		90	90
Nonaccrual loan interest		439	464
Other real estate owned		127	340
Amortization of core deposits		28	40
Amortization of goodwill		144	202
Capitalized interest and repair expense		23	24
Net operating loss carryforward		3,631	3,730
AMT carryforward		320	339
Unrealized loss on securities available for sale		-	328
Total Assets, gross		5,929		6,678
Valuation allowance		-		-
Total Assets, net		5,929		6,678
Deferred Tax Liabilities
Accelerated depreciation		937	878
Accrued employee benefits		11	(6)
Unrealized gain on securities available for sale		15	-
Prepaid expenses		59	15
Deferred loan costs		331	315
Total Liabilities, gross		1,353		1,202
Net Deferred Tax Asset	$	4,576	$	5,476

In accordance with applicable accounting guidance, the Company determined that it was not required to establish a valuation allowance for deferred tax assets as it is more likely than not that the deferred tax asset will be realized through future taxable income, future reversals of existing taxable temporary differences and tax strategies. The Company’s net deferred tax asset is recorded in the consolidated financial statements separately. 

At December 31, 2019 and 2018, the Company had no unrecognized tax benefits. The Company does not expect the total amount of unrecognized tax benefits to increase significantly over the next twelve months. The company recognizes interest and penalties as a component of income tax expense. 

The Company and Bank are subject to U. S. federal income tax, a capital based franchise tax in the Commonwealth of Virginia; and income and excise taxes in West Virginia and Tennessee, respectively, based on earnings realized from business activities within each state. Years prior to 2016 are no longer subject to examination by taxing authorities.