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Note 10 - Income Taxes

12 Months Ended

Dec. 31, 2013

Note 10: Income Taxes

The Company files United States federal income tax returns, and Virginia, West Virginia and North Carolina state income tax returns. 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.

Allocation of income tax expense between current and deferred portions is as follows:

	Years ended December 31,
	2013		2012		2011
Current	$	5,253	$	5,064	$	4,665
Deferred expense		64		181		582
Total income tax expense	$	5,317	$	5,245	$	5,247

The following is a reconciliation of the “expected” income tax expense, computed by applying the U.S. Federal income tax rate of 35% to income before income tax expense, with the reported income tax expense:

	Years ended December 31,
	2013			2012			2011
Computed “expected” income tax expense	$	8,087		$	8,047		$	8,010
Tax-exempt interest income		(2,592	)		(2,554	)		(2,517	)
Nondeductible interest expense		118			139			146
Other, net		(296	)		(387	)		(392	)
Reported income tax expense	$	5,317		$	5,245		$	5,247

The components of net deferred tax assets, included in other assets, are as follows:

	December 31,
	2013			2012
Deferred tax assets:
Allowance for loan losses and unearned fee income	$	3,169		$	3,219
Valuation allowance on other real estate owned		110			73
Deferred compensation and other liabilities		1,201			2,176
Discount accretion of securities		29			19
Net unrealized loss on securities available for sale		7,545			---
Total deferred tax assets	$	12,054		$	5,487

Deferred tax liabilities:
Fixed assets	$	(270	)	$	(317	)
Deposit intangibles		(1,191	)		(1,039	)
Other		---			(31	)
Net unrealized gains on securities available for sale		---			(1,102	)
Total deferred tax liabilities		(1,461	)		(2,489	)
Net deferred tax assets	$	10,593		$	2,998

The Company has determined that a valuation allowance for the gross deferred tax assets is not necessary at December 31, 2013 and 2012 because the realization of all gross deferred tax assets can be supported by the amount of taxes paid during the carryback period available under current tax laws.

- 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.

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