Note 12 - Income taxes

The Company files income tax returns in the U.S. federal jurisdiction and 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.

Income tax expense attributable to income before income tax expense is summarized as follows:


	December 31,
	2015	2014
Current federal income tax expense	$1,725	$926
Deferred federal income tax (benefit) expense	(74)	362
Income tax expense	$1,651	$1,288

Income tax expense differed from amounts computed by applying the U.S. Federal income tax rate of 34% to income before income tax expense as a result of the following:

	2015	2014
Computed “expected” income tax expense	$1,817	$1,599
Increase (reduction) in income tax resulting from:
Non-taxable income	(106)	(134)
Non-deductible expenses	38	27
Tax credit investments	(98)	(204)
Income tax expense	$1,651	$1,288

The tax effects of temporary differences result in deferred tax assets and liabilities as presented below:


	2015	2014
Deferred tax assets
Allowance for loan losses	$881	$785
Unrealized loss on available-for-sale securities	305	201
OREO	124	169
Non-accrual interest	432	484
Other	64	-
Gross deferred tax assets	1,806	1,639

Deferred tax liabilities
Depreciation	204	208
Other	203	210
Gross deferred tax liabilities	407	418
Net deferred tax asset	$1,399	$1,221