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 2016.

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


	December 31,
	2019	2018
Current federal income tax expense	$1,346	$1,461
Deferred federal income tax expense (benefit)	(17)	(132)
Income tax expense	$1,329	$1,329

Note 12 - Income taxes (continued)

Income tax expense differed from amounts computed by applying the U.S. Federal income tax rate of 21% to income before income tax expense as a result of the following:

	2019		2018
Computed “expected” income tax expense	$1,456	$1,393
Increase (reduction) in income tax resulting from:
Non-taxable income	(143)	(73)
Non-deductible expenses	13	13
Other	3	(4)
Income tax expense	$1,329	$1,329

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



	December 31,
	2019	2018
Deferred tax assets
Lease liabilities	$1,249	$ -
Allowance for loan losses	1,015	962
Unrealized losses on available-for-sale securities	1	596
OREO	194	138
Non-accrual interest	251	243
Deferred Compensation	84	75
Other	22	8
Gross deferred tax assets	2,816	2,022


Deferred tax liabilities
Right-of-use assets	1,223	-
Depreciation	312	189
Other	104	78
Gross deferred tax liabilities	1,639	267
Net deferred tax asset	$1,177	$1,755