FIRST NATIONAL CORP /VA/ Income Taxes Disclosure
Note 12. Income Taxes
The Company is subject to U.S. federal and Virginia income tax as well as bank franchise tax in 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 2022.
Net deferred tax assets consisted of the following components at December 31, 2025 and 2024 (in thousands):
| 2025 | 2024 | |||||||
| Deferred Tax Assets | ||||||||
| Allowance for credit losses | $ | 3,253 | $ | 3,641 | ||||
| Acquisition accounting adjustments, net | 2,509 | 450 | ||||||
| Post-retirement benefits | 347 | 333 | ||||||
| Unvested stock-based compensation | 95 | 94 | ||||||
| Reserve for letter of credit losses | 12 | 18 | ||||||
| Limited partnership investments | 2 | 2 | ||||||
| Lease liability | 388 | 425 | ||||||
| Unrealized loss on securities available for sale | 3,735 | 5,534 | ||||||
| NOL carryover - acquired from Fincastle | 1,095 | 1,207 | ||||||
| Loan origination fees, net | 359 | 2,937 | ||||||
| $ | 11,795 | $ | 14,641 | |||||
| Deferred Tax Liabilities | ||||||||
| Depreciation | $ | 1,192 | $ | 1,043 | ||||
| Right of use asset | 378 | 421 | ||||||
| Investment in partnerships | 9 | 70 | ||||||
| Core deposit intangible | 2,613 | 2,937 | ||||||
| Cash flow hedges | 466 | 565 | ||||||
| $ | 4,658 | $ | 5,036 | |||||
| Net deferred tax assets | $ | 7,137 | $ | 9,605 | ||||
The income tax expense for the years ended December 31, 2025 and 2024 consisted of the following (in thousands):
| 2025 | 2024 | |||||||
| Current income tax expense | ||||||||
| Federal | $ | 3,836 | $ | 1,519 | ||||
| State | 19 | — | ||||||
| Total current income tax expense | 3,855 | 1,519 | ||||||
| Deferred income tax expense (benefit) | ||||||||
| Federal | 439 | (437 | ) | |||||
| State | (53 | ) | — | |||||
| Total deferred income tax expense (benefit) | 386 | (437 | ) | |||||
| Provision for income taxes | ||||||||
| Federal | 4,275 | 1,082 | ||||||
| State | (34 | ) | — | |||||
| Total provision for income tax expense | $ | 4,241 | $ | 1,082 | ||||
The income tax expense 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, 2025 and 2024, due to the following (in thousands):
| 2025 | 2024 | |||||||
| Computed tax expense at statutory federal rate | $ | 4,608 | $ | 1,690 | ||||
| State tax expense | 26 | — | ||||||
| Increase in income taxes resulting from: | ||||||||
| Merger expenses | 36 | 240 | ||||||
| Other | 47 | 25 | ||||||
| Decrease in income taxes resulting from: | ||||||||
| Tax-exempt interest and dividend income | (172 | ) | (102 | ) | ||||
| Bargain purchase gain | (64 | ) | (613 | ) | ||||
| Income from bank owned life insurance | (240 | ) | (159 | ) | ||||
| $ | 4,241 | $ | 1,082 | |||||
The income tax expense by jurisdiction for the years ended December 31, 2025 and 2024 consisted of the following (in thousands):
| 2025 | 2024 | |||||||
| Federal | $ | 4,275 | $ | 1,082 | ||||
| State | (34 | ) | 0 | |||||
| Total | $ | 4,241 | $ | 1,082 | ||||
The income tax expense by state for the years ended December 31, 2025 and 2024 consisted of the following (in thousands):
| 2025 | 2024 | |||||||
| State | ||||||||
| North Carolina | (34 | ) | — | |||||
| Total | $ | (34 | ) | $ | — | |||
The effective tax rate consisted of the following components at December 31, 2025 and 2024 (in thousands):
| December 31, 2025 | December 31, 2024 | ||||||||||||
| Amount | Percent | Amount | Percent | ||||||||||
| U.S. federal statutory tax rate | $ | 4,608 | 21.0 | % | $ | 1,690 | 21.0 | % | |||||
| State and local income taxes, net of federal income tax effect | 26 | 0.1 | % | — | 0.0 | % | |||||||
| Nontaxable or nondeductible items | |||||||||||||
| Tax-exempt interest and dividend income | (172 | ) | -0.8 | % | (102 | ) | -1.3 | % | |||||
| Income from bank owned life insurance | (240 | ) | -1.1 | % | (159 | ) | -2.0 | % | |||||
| Other, net | 19 | 0.1 | % | (347 | ) | -4.3 | % | ||||||
| Effective tax rate | $ | 4,241 | 19.3 | % | $ | 1,082 | 13.4 | % | |||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 25, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
| 2023 | Mar 29, 2024 | |
| 2022 | Mar 30, 2023 | |
| 2021 | Mar 30, 2022 | |
| 2020 | Mar 31, 2021 | |
| 2019 | Mar 13, 2020 | |
| 2018 | Mar 14, 2019 | |
| 2017 | Mar 23, 2018 | |
| 2016 | Mar 29, 2017 | |
| 2015 | Mar 30, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.