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Note 11 - Income Taxes

12 Months Ended

Dec. 31, 2022

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 2019.

Net deferred tax assets consisted of the following components at December 31, 2022 and 2021 (in thousands):

		2022				2021
Deferred Tax Assets
Allowance for loan losses		$	1,564			$	1,199
Acquisition accounting adjustments, net			570				822
Post-retirement benefits			188				156
Core deposit intangible			270				309
Unvested stock-based compensation			81				45
Reserve for letter of credit losses			88				66
Limited partnership investments			39				8
Lease liability			113				60
Housing tax credit			—				24
Unrealized loss on securities available for sale			6,536				118
NOL carryover - acquired from Fincastle			1,434				1,548
Loan origination fees, net			176				183
		$	11,059			$	4,538
Deferred Tax Liabilities
Depreciation		$	701			$	750
Right of use asset			112				61
Housing equity fund			—				12
Other real estate owned			29				158
Cash flow hedges			563				198
		$	1,405			$	1,179
Net deferred tax assets		$	9,654			$	3,359

The income tax expense for the years ended December 31, 2022 and 2021 consisted of the following (in thousands):

		2022				2021
Current tax expense		$	4,193			$	4,268
Deferred tax benefit			(241	)			(1,682	)
		$	3,952			$	2,586

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, 2022 and 2021, due to the following (in thousands):

		2022				2021
Computed tax expense at statutory federal rate		$	4,357			$	2,718
Increase in income taxes resulting from:
Merger expenses			—				165
Other			8				28
Decrease in income taxes resulting from:
Tax-exempt interest and dividend income			(252	)			(214	)
Income from bank owned life insurance			(161	)			(111	)
		$	3,952			$	2,586

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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

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-Publisher FASB
-Name Accounting Standards Codification
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