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 2013.

Net deferred tax assets consisted of the following components at December 31, 2016 and 2015 (in thousands):


	2016		2015
Deferred Tax Assets
Allowance for loan losses	$	1,809	$	1,878
Allowance for other real estate owned		—		76
Unfunded pension liability		—		719
Gain on other real estate owned		—		672
Securities available for sale		447		102
Accrued pension		689		568
Core deposit intangible		371		179
Unvested stock-based compensation		19		11
Limited partnership investments		17		—
Loan origination fees, net		48		—

	$	3,400	$	4,205

Deferred Tax Liabilities
Depreciation	$	708	$	693
Discount accretion		2		2
Loan origination costs, net		—		18

	$	710	$	713


Net deferred tax assets	$	2,690	$	3,492

The income tax expense for the years ended December 31, 2016 and 2015 consisted of the following (in thousands):


	2016		2015

Current tax expense	$	1,925	$	822
Deferred tax expense		428		134

	$	2,353	$	956

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, 2016 and 2015, due to the following (in thousands):


	2016			2015
Computed tax expense at statutory federal rate	$	2,808		$	1,227
Decrease in income taxes resulting from:
Tax-exempt interest and dividend income		(254	)		(201	)
Other		(201	)		(70	)

	$	2,353		$	956