Note 10 - Income Taxes

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE

10:

     INCOME TAXES

As of

December

31,

2016

and

2015,

retained earnings included approximately

$5,075,000

for which

no

deferred income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which would be subject to the then current corporate income tax rate. The unrecorded deferred income tax liability on the above amount was approximately

$1,878,000

as of both

December

31,

2016

and

2015.

The provision for income taxes consists of:

	Years Ended
	December 31,
	2016		2015		2014
Taxes currently payable	$	1,889,673	$	2,140,591	$	1,445,947
Deferred income taxes		123,091		320,738		666,561
	$	2,012,764	$	2,461,329	$	2,112,508

The tax effects of temporary differences related to deferred taxes shown on the

December

31,

2016

and

2015

balance sheets are:

	December 31,			December 31,
	2016			2015
Deferred tax assets:
Allowances for loan losses	$	1,952,433		$	1,976,060
Writedowns on foreclosed assets held for sale		681,281			773,652
Deferred loan fees/costs		56,209			123,390
Unrealized depreciation on available-for-sale securities		768,879			401,688
Tax Credits		521,441			-
Other		228,996			446,122
		4,209,239			3,720,912
Deferred tax liabilities:
FHLB stock dividends		(46,481	)		(51,713	)
Accumulated depreciation		(642,977	)		(368,245	)
Other		(45,646	)		(70,849	)
		(735,104	)		(490,807	)
Net deferred tax asset	$	3,474,135		$	3,230,105

A reconciliation of income tax expense at the statutory rate to income tax expense at the Company’s effective rate is shown below:

	Years ended
	December 31,
	2016			2015			2014
Computed at statutory rate		34.0	%		34.0	%		34.0	%
Increase (reduction) in taxes resulting from:
State financial institution tax and credits		(1.1%	)		(3.1%	)		(3.4%	)
Cash surrender value of life insurance		(2.2%	)		(1.5%	)		(1.6%	)
Tax exempt interest		(3.7%	)		(1.7%	)		(1.4%	)
Other		(0.5%	)		2.4	%		(0.8%	)
Actual effective rate		26.5	%		30.1	%		26.8	%