The current portion of the provision for income taxes is based upon the results of operations, adjusted for the effect of certain tax-exempt income and nondeductible expenses and income and expenses realized in the current period for the tax purposes. Certain items of income and expense are reported in different periods for financial reporting and income tax return purposes resulting in temporary differences. The tax effects of these temporary differences are recognized currently in the deferred income tax provision or benefit.

The following table presents current and deferred income tax expense (benefit) for the periods stated.

	Year Ended December 31,
	2018			2017
Current (benefit) expense	$	(313	)	$	362
Deferred expense		846			435
Income tax expense	$	533		$	797

The Company files a consolidated federal income tax return with the Internal Revenue Service. The Commonwealth of Virginia does not assess an income tax on regulated financial institutions; instead, the Company pays a bank franchise tax, based primarily on the Bank’s and Financial Group’s capital (i.e., shareholders’ equity), to the Commonwealth of Virginia and its municipalities, which is reported as noninterest expense in the consolidated statements of operations. Bank franchise tax expense was $726 thousand and $533 thousand for the years ended December 31, 2018 and 2017, respectively.

The Tax Cuts and Jobs Act of 2017 (“TCJA”) enacted in December 2017 reduced the federal corporate statutory income tax rate from 35% to 21% effective January 1, 2018. As a result of the TCJA, the Company recognized a $1.3 million reduction in the value of its net deferred tax asset as of December 31, 2017 and a deferred tax expense of the same amount in the year ended 2017.

The following table presents the federal statutory income tax rate reconciled to the Company’s effective tax rate for the periods stated.

	Year Ended December 31,
	2018			2017
Federal statutory income tax rate		21.0	%		34.0	%
Increase (decrease) resulting from:
Net tax-exempt income		(5.6	%)		85.0	%
Merger-related expenses		0.0	%		(15.0	%)
Tax Cuts and Jobs Act of 2017 adjustment to deferred taxes		0.0	%		(283.1	%)
Income tax return to provision (2017) adjustment		(3.9	%)		0.0	%
Other, net		0.7	%		11.4	%
Federal effective income tax rate		12.1	%		(167.7	%)

Deferred tax assets or liabilities are computed based on the difference between the financial statement and income tax bases of assets and liabilities. These differences will result in deductible or taxable amounts in a future year(s) when the reported amounts of assets or liabilities are settled.

The following table presents the components of the net deferred tax asset as of the dates stated using a statutory income tax rate of 21%. The Company has concluded that it is more likely than not that its deferred tax assets will be utilized in future periods; therefore, no valuation allowance has been recorded against all or a portion of its deferred tax assets.

	December 31, 2018			December 31, 2017
Deferred tax assets
Allowance for loan losses	$	1,629		$	1,632
Other real estate owned		226			433
Pension and post-retirement benefit plans		127			266
Unrealized losses on available-for-sale securities		333			130
Deferred and share-based compensation plans		237			215
Alternative minimum tax credit		—			134
Fair value adjustments on acquired loans and time deposits resulting from the Merger		969			1,665
Net deferred loan fees		53			65
Other		124			270
Total deferred tax assets		3,698			4,810
Deferred tax liabilities
Depreciation of fixed assets		(359	)		(69	)
Amortization of goodwill and core deposit intangible asset		(1,050	)		(1,218	)
Premium on fixed assets acquired in the Merger		(553	)		(561	)
Recapture of bad debts experience reserve		(178	)		(229	)
Other		(48	)		(391	)
Total deferred tax liabilities		(2,188	)		(2,468	)
Deferred tax assets, net	$	1,510		$	2,342

The Company had no unrecognized tax benefits recorded as of December 31, 2018 and 2017. Tax years 2015, 2016, and 2017 are still open for Internal Revenue Service audit.