Federal Income Taxes

12 Months Ended

Dec. 31, 2015

Note 13 - Federal Income Taxes

The components of income tax expense for the years ended December 31, 2015 and 2014 are as follows:



	2015		2014

	(In Thousands)

Current	$	2,981	$	2,939
Deferred		(33)		(460)
	$	2,948	$	2,479

A reconciliation of the statutory federal income tax at a rate of 34% to the income tax expense included in the statement of income for the years ended December 31, 2015 and 2014 is as follows:



	2015		2014

	(In Thousands)

Federal income tax at statutory rate	$	3,521	$	3,021
Tax free interest		(518)		(510)
Other		(55)		(32)

	$	2,948	$	2,479

The Company follows guidance in ASC Topic 740 regarding accounting for uncertainty in income taxes. The Company has evaluated its tax positions. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that has a likelihood of being realized on examination of more than 50 percent. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Under the “more likely than not” threshold guidelines, the Company believes no significant uncertain tax positions exist, either individually or in the aggregate, that would give rise to the non-recognition of an existing tax benefit. As of December 31, 2015 and 2014, the Company had no material unrecognized tax benefits or accrued interest and penalties. The Company’s policy is to account for interest as a component of interest expense and penalties as a component of other expense. The Company is subject to U.S. federal income tax.

The components of the net deferred tax asset at December 31, 2015 and 2014 are as follows:



	2015		2014

	(In Thousands)

Deferred tax assets:
Allowance for loan losses	$	2,063	$	1,909
Accrued SERP		1,159		1,031
Other		406		502

Total Deferred Tax Assets		3,628		3,442

Deferred tax liabilities:
Premises and equipment		25		-
Prepaid assets		320		303
Non-qualified stock awards		3		-
Deferred loan costs		481		373
Unrealized gain on securities available for sale		636		754

Total Deferred Tax Liabilities	$	1,465	$	1,430

Net Deferred Tax Asset	$	2,163	$	2,012

Based upon the level of historical taxable income and projections for future taxable income over periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences.