INCOME TAXES

12 Months Ended

Dec. 31, 2021

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, 2021 and 2020.

The source of pre-tax book income is summarized as follows for the years ended December 31, 2021 and 2020:

(Dollars are in thousands)	2021		2020
Pre-tax book income
Domestic	$	8,952	$	3,993
Total pre-tax book income	$	8,952	$	3,993

Income tax expense is summarized as follows for the years ended December 31, 2021 and 2020:

(Dollars are in thousands)	2021			2020
Current income tax expense (benefit)
Federal	$	(172	)	$	(200	)
State		—			—
Total current income tax expense (benefit)		(172	)		(200	)

Deferred income tax expense
Federal		2,067		1,304
State		47		(1	)
Total deferred income tax expense		2,114		1,303
Income tax expense	$	1,942	$	1,103

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 ended December 31, 2021 and 2020, respectively:

(Dollars are in thousands)	2021			2020
Income tax expense (benefit) at the applicable federal rate	$	1,879		$	839
Permanent differences resulting from:
Nondeductible expenses		7			8
Tax exempt interest income		(4	)		(7	)
Bank owned life insurance		(7	)		(16	)
Other adjustments		67			279
Income tax expense	$	1,942		$	1,103

The net deferred tax assets and liabilities resulting from temporary differences as of December 31, 2021 and 2020, are summarized as follows:

(Dollars are in thousands)	2021		2020
Deferred Tax Assets
Allowance for loan losses	$	1,500	$	1,568
Deferred compensation		85		92
Nonaccrual loan interest		532		490
Unrealized loss on securities available for sale		216		—
Other real estate owned		305		83
Amortization of core deposits		6		18
Amortization of goodwill		31		90
Capitalized interest and repair expense		23		23
Net operating loss carryforward		460		2,172
Other		98		33
Total Assets, gross		3,256		4,569
Valuation allowance		—		—
Total Assets, net		3,256		4,569
Deferred Tax Liabilities
Accelerated depreciation		1,105		869
Unrealized gain on securities available for sale		—		197
Prepaid expenses		27		22
Deferred loan costs		451		355
Total Liabilities, gross		1,583		1,443
Net Deferred Tax Asset	$	1,673	$	3,126

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, 2021 and 2020, 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, Tennessee and North Carolina, respectively, based on earnings realized from business activities within each state. Years prior to 2018 are no longer subject to examination by taxing authorities.