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Note 11 - Income Taxes
 12 Months Ended
Dec. 31, 2021
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

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 2017.

 

Net deferred tax assets consisted of the following components at December 31, 2021 and 2020 (in thousands):

 

 

  

2021

  

2020

 

Deferred Tax Assets

        

Allowance for loan losses

 $1,199  $1,572 

Acquisition accounting adjustments, net

  822   — 

Post-retirement benefits

  156   101 

Core deposit intangible

  309   381 

Unvested stock-based compensation

  45   31 

Reserve for letter of credit losses

  66   — 

Limited partnership investments

  8   8 

Lease liability

  60   72 

Housing tax credit

  24   — 

Unrealized loss on securities available for sale

  118   — 

NOL carryover - acquired from Fincastle

  1,548   — 

Loan origination fees, net

  183   328 
  $4,538  $2,493 

Deferred Tax Liabilities

        

Depreciation

 $750  $663 

Right of use asset

  61   73 

Housing equity fund

  12   — 

Unrealized gains on securities available for sale

  —   813 

Other real estate owned

  158   — 

Cash flow hedges

  198   91 
  $1,179  $1,640 

Net deferred tax assets

 $3,359  $853 

 

The income tax expense for the years ended December 31, 2021 and 2020 consisted of the following (in thousands):

 

 

  

2021

  

2020

 

Current tax expense

 $4,268  $2,972 

Deferred tax benefit

  (1,682)  (923)
  $2,586  $2,049 

 

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, 2021 and 2020, due to the following (in thousands):

 

  

2021

  

2020

 

Computed tax expense at statutory federal rate

 $2,718  $2,290 

Increase in income taxes resulting from:

        

Merger expenses

  165   — 

Other

  28   10 

Decrease in income taxes resulting from:

        

Tax-exempt interest and dividend income

  (214)  (153)

Income from bank owned life insurance

  (111)  (98)
  $2,586  $2,049