Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 11. Income Taxes

The Company files tax returns in the U.S. federal jurisdiction and required states. With few exceptions, the Bank is no longer subject to tax examination by tax authorities for years prior to 2017.  

The Commonwealth of Virginia assesses a Bank Franchise Tax on banks instead of a state income tax. The Bank Franchise Tax expense is reported in non-interest expense and the tax’s calculation is unrelated to taxable income.

The provision for income taxes consists of the following components:

(Dollars in thousands)	2021		2020
Current expense	$	5,449	$	5,595
Deferred expense (benefit)		336		(1,752	)
Total	$	5,785	$	3,843

Income tax expense for the years ended December 31, 2021 and 2020 differed from the federal statutory rate applied to income before income taxes for the following reasons:

	Year ended December 31,
(Dollars in thousands)	2021			2020
Computed “expected” income tax expense	$	5,871		$	4,108
Increase (decrease)in income taxes resulting from:
Non-deductible expense		15			25
Tax exempt Interest		(230	)		(259	)
BOLI Income		(189	)		(164	)
Low Income Housing Investment		49			—
State Income Taxes		326			165
Restricted Stock Adjustment		4			(95	)
Federal tax credits		(64	)		—
Other Adjustments		3			63
Total	$	5,785		$	3,843

The tax effects of temporary differences result in deferred tax assets and liabilities as presented below:

	December 31,
(Dollars in thousands)	2021		2020
Deferred tax assets:
Allowance for loan losses	$	2,591	$	2,851
Restricted stock		373		313
OREO adjustment		96		95
Net loan fees		1,214		1,368
Organizational costs		5		6
Right-of-use liability		1,718		1,463
Accrued compensation		116		—
Unrealized losses on securities transferred to held to maturity		—		12
Gross deferred tax assets		6,113		6,108
Deferred tax liabilities:
Depreciation		393		267
Unrealized gain on securities available for sale		56		285
Prepaid expense		22		20
Right-of-use asset		1,585		1,371
Other		11		—
Gross deferred tax liabilities		2,067		1,943
Net deferred tax asset	$	4,046	$	4,165