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Income Taxes | 12 Months Ended
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Dec. 31, 2013
Income Tax Disclosure [Abstract] |
Income Taxes |
Note 10. | Income Taxes
The Company is subject to U.S. federal and Virginia income tax as well as bank franchise tax in the state 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 2010. Net deferred tax assets consisted of the following components at December 31, 2013 and 2012:
|  | (in thousands) |
|  | 2013 |  |  | 2012 |
Deferred Tax Assets |  |  |  |  |  |  |  |
Allowance for loan losses |  | $ | 3,619 |  |  | $ | 4,446 |
Allowance for other real estate owned |  |  | 566 |  |  |  | 760 |
Interest on non-accrual loans |  |  | — |  |  |  | 266 |
Unfunded pension liability |  |  | 90 |  |  |  | 894 |
Split dollar liability |  |  | 207 |  |  |  | 391 |
Gain on other real estate owned |  |  | 769 |  |  |  | 990 |
Securities available for sale |  |  | 584 |  |  |  | — |
Accrued pension |  |  | 289 |  |  |  | 4 |
Loan origination costs, net |  |  | 6 |  |  |  | — |
Other |  |  | 10 |  |  |  | 118 |
|  | $ | 6,140 |  |  | $ | 7,869 |
Deferred Tax Liabilities |  |  |  |  |  |  |  |
Depreciation |  | $ | 685 |  |  | $ | 674 |
Securities available for sale |  |  | — |  |  |  | 601 |
Discount accretion |  |  | 5 |  |  |  | 3 |
Loan origination costs, net |  |  | — |  |  |  | 30 |
|  | $ | 690 |  |  | $ | 1,308 |
Valuation allowance |  |  | — |  |  |  | 6,561 |
Net deferred tax assets |  | $ | 5,450 |  |  | $ | — |
As of December 31, 2013, the Company reversed the full valuation allowance on its net deferred tax assets (DTAs). The realization of DTAs is assessed and a valuation allowance is recorded if it is “more likely than not” that all or a portion of the deferred tax asset will not be realized. “More likely than not” is defined as greater than a 50% chance. All available evidence, both positive and negative is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed. In assessing the need for a valuation allowance, the Company considered all available evidence about the realization of DTAs, both positive and negative, that could be objectively verified. Positive evidence considered included (1) a return to trailing three years of cumulative pre-tax income in 2013, (2) the Company’s recent history of quarterly pre-tax earnings (seven out of the last eight quarters), (3) expectations for sustained profitability with sufficient taxable income to fully utilize the remaining net deferred tax benefits, and (4) significant reductions in the level of non-performing assets since their peak during 2011, which was the primary source of the losses generated in 2010 and 2011. Negative evidence considered was (1) the uncertainty about the potential impact on earnings from nonperforming assets along with (2) a pre-tax loss reported by the Company during one quarterly period over the previous two years. As the number of consecutive periods of profitability increased and the level of profits are indicative of on-going results, the weight of cumulative losses as negative evidence decreased. A reduction in the weight given to such losses is further validated given that the source of the losses was an elevated level of problem assets and related credit costs, which have since been significantly reduced. After weighing both the positive and negative evidence, management determined that a valuation allowance on the net deferred tax asset was no longer warranted as of December 31, 2013. The provision (benefit) for income taxes for the years ended December 31, 2013, 2012 and 2011 consisted of the following:
|  | (in thousands) |
|  | 2013 |  |  | 2012 |  |  | 2011 |
Current tax expense (benefit) |  | $ | (44 | ) |  | $ | 965 |  |  | $ | (2,607 | )
Deferred tax expense (benefit) |  |  | (4,776 | ) |  |  | — |  |  |  | 6,442 |
|  | $ | (4,820 | ) |  | $ | 965 |  |  | $ | 3,835 |
The income tax provision (benefit) differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income for the years ended December 31, 2013, 2012 and 2011, due to the following:
|  | (in thousands) |
|  | 2013 |  |  | 2012 |  |  | 2011 |
Computed tax expense (benefit) at statutory federal rate |  | $ | 1,718 |  |  | $ | 1,280 |  |  | $ | (2,423 | )
Increase (decrease) in income taxes from deferred tax valuation allowance |  |  | (6,275 | ) |  |  | (167 | ) |  |  | 6,442 |
Decrease in income taxes resulting from: |  |  |  |  |  |  |  |  |  |  |  |
Tax-exempt interest and dividend income |  |  | (153 | ) |  |  | (125 | ) |  |  | (186 | )
Other |  |  | (110 | ) |  |  | (23 | ) |  |  | 2 |
|  | $ | (4,820 | ) |  | $ | 965 |  |  | $ | 3,835 |

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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