Note 11. 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 2012.

Net deferred tax assets consisted of the following components at December 31, 2015 and 2014 (in thousands):


	2015		2014
Deferred Tax Assets
Allowance for loan losses	$	1,878	$	2,284
Allowance for other real estate owned		76		127
Unfunded pension liability		719		732
Gain on other real estate owned		672		639
Securities available for sale		102		71
Accrued pension		568		392
Core deposit intangible		179		13
Unvested stock-based compensation		11		—

	$	4,205	$	4,258

Deferred Tax Liabilities
Depreciation	$	693	$	604
Discount accretion		2		2
Loan origination fees, net		18		44

	$	713	$	650

Net deferred tax assets	$	3,492	$	3,608

The income tax expense for the years ended December 31, 2015 and 2014 consisted of the following (in thousands):


	2015		2014
Current tax expense	$	822	$	1,528
Deferred tax expense		134		1,971

	$	956	$	3,499

The income tax expense 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, 2015 and 2014, due to the following (in thousands):


	2015			2014
Computed tax expense at statutory federal rate	$	1,227		$	3,784
Decrease in income taxes resulting from:
Tax-exempt interest and dividend income		(201	)		(189	)
Other		(70	)		(96	)

	$	956		$	3,499