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 2013.

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


	December 31,
	2016	2015
Current federal income tax expense	$1,983	$1,725
Deferred federal income tax (benefit) expense	(456)	(74)
Income tax expense	$1,527	$1,651

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:

	2016	2015
Computed “expected” income tax expense	$1,636	$1,817
Increase (reduction) in income tax resulting from:
Non-taxable income	(113)	(106)
Non-deductible expenses	4	38
Tax credit investments	-	(98)
Income tax expense	$1,527	$1,651

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


	2016	2015
Deferred tax assets
Allowance for loan losses	$1,353	$881
Unrealized loss on available-for-sale securities	824	305
OREO	141	124
Non-accrual interest	403	432
Other	78	64
Gross deferred tax assets	2,799	1,806

Deferred tax liabilities
Depreciation	130	204
Other	295	203
Gross deferred tax liabilities	425	407
Net deferred tax asset	$2,374	$1,399