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 2017.

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


	December 31,
	2020	2019
Current federal income tax expense	$2,037	$1,346
Deferred federal income tax expense (benefit)	(838)	(17)
Income tax expense	$1,199	$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:

	2020		2019
Computed “expected” income tax expense	$1,298	$1,456
Increase (reduction) in income tax resulting from:
Non-taxable income	(94)	(143)
Non-deductible expenses	12	13
Other	(17)	3
Income tax expense	$1,199	$1,329

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



	December 31,
	2020	2019
Deferred tax assets
Lease liabilities	$1,151	$1,249
Allowance for loan losses	1,503	1,015
Unrealized losses on available-for-sale securities	-	1
OREO	239	194
Non-accrual interest	130	251
Deferred Compensation	564	84
Other	27	22
Gross deferred tax assets	3,614	2,816


Deferred tax liabilities
Right-of-use assets	1,105	1,223
Depreciation	410	312
Unrealized gains on available-for-sale securities	476	-
Other	85	104
Gross deferred tax liabilities	2,076	1,639
Net deferred tax asset	$1,538	$1,177