Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 9. Income Taxes

The Company files income tax returns with the United States of America, the Commonwealth of Virginia and West Virginia. With few exceptions, the Company is no longer subject to federal, state, or local income tax examinations for years prior to 2019.

The net deferred tax asset at December 31, 2022 and 2021 consisted of the following components:

	December 31,
	2022		2021
	(in thousands)
Deferred tax assets:
Allowance for loan losses	$	2,356	$	1,845
Share-based compensation		222		136
Accrued postretirement benefits		21		21
Home equity origination costs		81		67
Nonaccrual interest		48		65
Lease liabilities		1,045		1,110
Credit carryforward		648		973
Securities available for sale		5,440		46
Other		26		27
	$	9,887	$	4,290
Deferred tax liabilities:
Property and equipment	$	710	$	659
Right-of-use assets		1,001		1,079
Loan servicing rights		144		—
	$	1,855	$	1,738
Net deferred tax asset	$	8,032	$	2,552

The Company has not recorded a valuation allowance for deferred tax assets because management believes that it is more likely than not that they will be ultimately realized.

Income tax expense for the years ended December 31, 2022 and 2021 consisted of the following components:

	December 31,
	2022			2021
	(in thousands)
Current tax expense	$	3,236		$	3,203
Deferred tax (benefit)		(86	)		(1,437	)
	$	3,150		$	1,766

The following table reconciles income tax expense to the statutory federal corporate income tax amount, which was calculated by applying the federal corporate income tax rate to pre-tax income for the years ended December 31, 2022 and 2021.

	December 31,
	2022			2021
	(in thousands)
Statutory federal corporate tax amount	$	3,711		$	2,685
Tax-exempt interest (income)		(81	)		(135	)
Officer insurance (income)		(131	)		(102	)
Net tax credits		(353	)		(686	)
Other, net		4			4
	$	3,150		$	1,766

The effective tax rates were 17.83% and 13.81% for years ended December 31, 2022 and 2021, respectively. The effective tax rates were impacted by tax credits on qualified affordable housing project investments as discussed in Note 25 to the Consolidated Financial Statements as well as qualified rehabilitation credits.