NOTE 12, Income Taxes

The components of income tax expense for the current and prior year-ends are as follows:

	2014				2013
	(in thousands)
Current tax expense		$	297		$	664
Deferred tax benefit			(101	)		(316	)
Reported tax expense		$	196		$	348

A reconciliation of the expected federal income tax expense on income before income taxes with the reported income tax expense for the same periods follows:

	Years Ended December 31,
	2014			2013
	(in thousands)
Expected tax expense (34%)	$	1,466		$	1,194
Interest expense on tax-exempt assets		24			21
Tax credit for investment		(324	)		(122	)
Tax-exempt interest		(631	)		(481	)
Bank-owned life insurance		(289	)		(288	)
Other, net		(50	)		24
Reported tax expense	$	196		$	348

The effective tax rates for 2014 and 2013 were 4.6% and 9.9%, respectively.

The components of the net deferred tax asset, included in other assets, are as follows:

	December 31,
	2014			2013
	(in thousands)
Deferred tax assets:
Allowance for loan losses	$	2,397		$	2,322
Interest on nonaccrual loans		100			381
Other real estate owned		989			1,256
Pension - other comprehensive income		1,252			797
Bank owned life insurance benefit		83			108
Charitable contributions carried forward		92			55
Net unrealized loss on securities available-for-sale		40			2,739
Net unrealized loss on securities transferred from available-for-sale to held-to-maturity		1,744			2,028
Unexercised nonqualified options		36			36
Alternative mininum tax		269			0
Deferred benefits and compensation		166			1
Other		70			24
	$	7,238		$	9,747

Deferred tax liabilities:
Depreciation	$	(696	)	$	(737	)
Deferred loan fees and costs		(295	)		(279	)
Pension		(627	)		(684	)
		(1,618	)		(1,700	)
Net deferred tax assets	$	5,620		$	8,047

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 2011.