Note 16 - Income Taxes

12 Months Ended

Dec. 31, 2018

Note

16.

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

longer subject to U.S. federal, state and local income tax examinations by tax authorities for years prior to

2015.

The current and deferred components of income tax expense for the periods ended

December 31, 2018

and

2017

are as follows:

Income tax expense for

2017

includes a downward adjustment of net deferred tax assets in the amount of

$100

thousand, recorded as a result of the enactment of

H.R.1

Tax Cuts and Jobs Act on

December 22, 2017.

The Act reduced the corporate Federal tax rate from

34%

21%

effective

January 1, 2018

Rate Reconciliation

Total income tax expense differed from the “expected” amount computed by applying the U.S. Federal income tax rate of

percent for

2018

and

percent for

2017

to income before income taxes as a result of the following.

(Dollars In Thousands)	2018			2017
Tax at statutory federal rate	$	1,017		$	1,291
Tax-exempt interest income		(55	)		(116	)
Earnings on Bank Owned Life Insurance		(177	)		(68	)
Stock awards		(30	)		24
Tax impact from enacted change in tax rate		–			100
Facilitative merger costs		88			–
Other		2			(3	)
Income tax expense	$	845		$	1,228

Deferred Income Tax Analysis

The significant components of net deferred taxes at

December 31, 2018

and

2017

are summarized as follows:

(Dollars In Thousands)	2018		2017
Deferred tax assets
Pre-opening expenses	$	18	$	28
Allowance for loan losses		689		528
Deferred compensation		286		215
Other real estate expenses		88		187
Unrealized loss on securities available for sale		216		38
Nonaccrual loan interest		20		9
Other		17		17
Deferred tax asset		1,334		1,022

Deferred tax liabilities
Property and equipment		179		230
Deferred loan fees and costs		607		613
Other		–		17
Deferred tax liability		786		860
Net deferred tax asset	$	548	$	162