Note 9 - Income Taxes

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

9

: Income Taxes

The Company files United States federal income tax returns, and Virginia, West Virginia and North Carolina state income tax returns. 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

2015.

Allocation of income tax expense between current and deferred portions is as follows:

	Years ended December 31,
	2018			2017		2016
Current	$	2,942		$	2,943	$	3,934
Deferred expense (benefit)		(382	)		1,790		18
Deferred tax adjustment for enacted change in tax rate		---			1,560		---
Total income tax expense	$	2,560		$	6,293	$	3,952

Income tax expense for

2017

includes a downward adjustment of net deferred tax assets in the amount of

$1,560,

recorded as a result of the enactment of the Tax Cuts and Jobs Act on

December 22, 2017. 

The Company’s marginal tax rate prior to the enactment of the Act is

35%.

Effective

January 1, 2018,

the Company’s tax rate is

21%.

The following is a reconciliation of the “expected” income tax expense, computed by applying the U.S. Federal income tax rate of

21%

to

2018

income before tax expense and

35%

to

2017

and

2016

income before income tax expense, with the reported income tax expense:

	Years ended December 31,
	2018			2017			2016
Computed “expected” income tax expense	$	3,929		$	7,135		$	6,613
Tax impact of enacted change in tax rate		---			1,560			---
Tax-exempt interest income		(1,255	)		(2,144	)		(2,234	)
Nondeductible interest expense		69			89			92
Other, net		(183	)		(347	)		(519	)
Reported income tax expense	$	2,560		$	6,293		$	3,952

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

	December 31,
	2018			2017
Deferred tax assets:
Allowance for loan losses and unearned fee income	$	1,683		$	1,773
Valuation allowance on other real estate owned		223			156
Defined benefit plan		1,864			1,592
Deferred compensation and other liabilities		1,308			863
Discount accretion of securities		---			---
Net unrealized loss on securities available for sale		1,348			984
Total deferred tax assets	$	6,426		$	5,368
Deferred tax liabilities:
Fixed assets	$	(365	)	$	(388	)
Deposit intangibles		(1,169	)		(1,059	)
Defined benefit plan, prepaid portion		(1,465	)		(1,579	)
Discount accretion of securities		(70	)		(2	)
Total deferred tax liabilities		(3,069	)		(3,028	)
Net deferred tax assets	$	3,357		$	2,340

During

2018,

the company re-designated its securities held to maturity as available for sale. The unrealized gain or loss on the re-designated securities is now recognized in accumulated other comprehensive income and the tax effects are included in deferred tax assets, net unrealized loss on securities available for sale.

The Company has determined that a valuation allowance for the gross deferred tax assets is

not

necessary at

December 31, 2018

and

2017.