Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and the state of Virginia and various other states. With few exceptions, the Company is no longer subject to U.S. federal or state income tax examinations by tax authorities for years prior to 2010.

The Company believes it is more likely than not that the benefit of deferred tax assets will be realized. Consequently, no valuation allowance for deferred tax assets is deemed necessary at December 31, 2013 and 2012.

Net deferred tax assets consist of the following components as of December 31, 2013 and 2012:



(Dollars in thousands)	2013		2012
Deferred tax assets:
Allowance for loan losses	$	4,508	$	4,843
Deferred compensation	581		553
Investment in affiliate	401		—
Interest rate swap	15		157
Other real estate owned	263		873
Other	2,204		1,725
Total deferred tax assets	$	7,972	$	8,151
Deferred tax liabilities:
Deferred loan costs, net	$	25	$	114
Investment in affiliate	—		261
Securities available for sale	135		3,488
Property and equipment	222		293
Total deferred tax liabilities	$	382	$	4,156
Net deferred tax assets	$	7,590	$	3,995

The provision for income taxes charged to operations for the years ended December 31, 2013, 2012, and 2011, consists of the following:



(Dollars in thousands)	2013			2012		2011
Current tax expense	$	2,315		$	759	$	825
Deferred tax expense (benefit)	(384		)	1,207		525
Total income tax expense	$	1,931		$	1,966	$	1,350

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income for the years ended December 31, 2013, 2012, and 2011, due to the following:



(Dollars in thousands)	2013			2012			2011
Computed "expected" tax expense	$	2,749		$	2,874		$	2,145
Decrease in income taxes resulting from:
Tax-exempt income	(1,037		)	(975		)	(969		)
Other, net	219			67			174
	$	1,931		$	1,966		$	1,350