NOTE 15, Income Taxes

On December 22, 2017, the Tax Act was signed into law. Among other things, the Tax Act permanently reduced the corporate income tax rate to 21% from the prior maximum rate of 35%, effective for tax years including or commencing January 1, 2018.

The components of income tax expense for the current and prior year-ends are as follows:

(dollars in thousands)	2019		2018
Current income tax expense	$	728	$	443
Deferred income tax expense (benefit)		352		(164	)
Reported income tax expense	$	1,080	$	279

A reconciliation of the expected federal income tax expense on income before income taxes with the reported income tax expense for the same periods follows:

	Years Ended December 31,
(dollars in thousands)	2019			2018
Expected tax expense	$	1,877		$	1,092
Interest expense on tax-exempt assets		7			18
Low-income housing tax credit		(440	)		(496	)
Tax-exempt interest, net		(201	)		(303	)
Bank-owned life insurance		(164	)		(164	)
Other, net		1			132
Reported tax expense	$	1,080		$	279

The effective tax rates for 2019 and 2018 were 12.1% and 5.4%, respectively.

The components of the net deferred tax asset, included in other assets, are as follows:

(dollars in thousands)	2019		2018
Deferred tax assets:
Allowance for loan losses	$	2,029	$	2,123
Nonaccrual loans		17		112
Acquistion accounting		61		120
Other real estate owned		-		21
Net operating losses		677		712
Investments in pass-through entities		122		113
Bank owned life insurance benefit		64		59
Securities available-for-sale		21		573
Stock awards		67		55
Alternative minimum tax		0		292
Deferred compensation		347		236
Other		59		63
	$	3,464	$	4,479
Deferred tax liabilities:
Premises and equipment	$	345	$	389
Acquistion accounting		76		86
Deferred loan fees and costs		117		181
		538		656
Net deferred tax assets	$	2,926	$	3,823

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