Note 14 - Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Text Block]

Note 14. Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and the Commonwealth of Virginia. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years prior to 2009. The Company has operating loss carryforwards of $4.0 million for federal income tax purposes that may be used to offset future taxable income. If not previously utilized, the federal loss carryforward will begin to expire in 2025.

The current and deferred components of income tax benfit for the periods ended December 31, 2012 and 2011 are as follows:

(Dollars In Thousands)	2012			2011
Current	$	853		$	–
Deferred		(1	)		661
Deferred tax asset valuation allowance change		(2,925	)		(661	)
Income tax benefit	$	(2,073	)	$	–

Rate Reconiliation

Total income tax expense (benefit) differed from the “expected” amount computed by applying the U.S. Federal income tax rate of 34 percent to income before income taxes as a result of the following.

(Dollars In Thousands)	2012			2011
Tax at statutory federal rate	$	858		$	652
Tax-exempt interest income		(16	)		–
Tax-exempt interest disallowance		1			–
AMT carryforward		53			9
Other		(44	)
Deferred tax asset valuation allowance change		(2,925	)		(661	)
Income tax benefit	$	(2,073	)	$	–

Deferred Income Tax Analysis

The significant components of net deferred tax assets at December 31, 2012 and 2011 are summarized as follows:

(Dollars In Thousands)	2012		2011
Deferred tax assets
Net operating losses	$	1,362	$	2,117
Pre-opening expenses		126		142
Allowance for loan losses		694		986
Stock-based compensation		236		236
Other real estate expenses		449		221
Other		23		27
Deferred tax asset		2,890		3,729
Deferred tax liabilities
Depreciation		329		317
Unrealized gain on securities available for sale		723		-
Accretion of bond discount		7		7
Deferred loan fees		493		480
Deferred tax liability		1,552		804
Net Deferred tax asset		1,338		2,925
Valuation allowance		–		(2,925	)
Net Deferred tax asset	$	1,338	$	–