Note 9 - Income Taxes

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 9 : Income Taxes

The Company files United States federal income tax returns, and Virginia, West Virginia and North Carolina state income tax returns. 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

2016.

Allocation of income tax expense between current and deferred portions is as follows:

	Years ended December 31,
	2019		2018			2017
Current	$	2,682	$	2,942		$	2,943
Deferred expense (benefit)		529		(382	)		1,790
Deferred tax adjustment for enacted change in tax rate		---		---			1,560
Total income tax expense	$	3,211	$	2,560		$	6,293

Income tax expense for

2017

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

$1,560,

recorded as a result of the enactment of the Tax Act on

December 22, 2017. 

The Company’s marginal tax rate prior to the enactment of the Act is

35%.

Effective

January 1, 2018,

the Company’s tax rate is

21%.

The following is a reconciliation of the “expected” income tax expense, computed by applying the U.S. federal income tax rate of

21%

to

2018

and

2019

income before tax expense and

35%

to

2017

income before income tax expense, with the reported income tax expense:

	Years ended December 31,
	2019			2018				2017
Computed “expected” income tax expense	$	4,342			$	3,929		$	7,135
Tax impact of enacted change in tax rate		---				---			1,560
Tax-exempt interest income		(1,019	)			(1,255	)		(2,144	)
Nondeductible interest expense		96				69			89
Other, net		(208	)			(183	)		(347	)
Reported income tax expense	$	3,211			$	2,560		$	6,293

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

	December 31,
	2019			2018
Deferred tax assets:
Allowance for loan losses and unearned fee income	$	1,597		$	1,683
Valuation allowance on other real estate owned		186			223
Defined benefit plan		2,281			1,864
Deferred compensation and other liabilities		848			1,308
Net unrealized loss on securities available for sale		---			1,348
Lease accounting		2			---
Total deferred tax assets	$	4,914		$	6,426
Deferred tax liabilities:
Fixed assets	$	(438	)	$	(365	)
Goodwill and deposit intangibles		(1,228	)		(1,169	)
Defined benefit plan, prepaid portion		(1,308	)		(1,465	)
Net unrealized gain on securities available for sale		(20	)		---
Discount accretion of securities		(43	)		(70	)
Total deferred tax liabilities		(3,037	)		(3,069	)
Net deferred tax assets	$	1,877		$	3,357

The Company has determined that a valuation allowance for the gross deferred tax assets is

not

necessary at

December 31, 2019

and

2018.