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Note 14 - Income Taxes
12 Months Ended
Dec. 31, 2020
Notes to Financial Statements  
Income Tax Disclosure [Text Block]
14.
Income Taxes
 
The components of income tax expense are as follows:
 
   
2020
   
2019
 
Current
               
Federal
 
$
387,193
    $
756,984
 
State
 
 
251,349
     
336,191
 
   
 
638,542
     
1,093,175
 
Deferred
 
 
(151,331
)
   
(53,841
)
   
$
487,211
    $
1,039,334
 
 
The components of the deferred tax expense are as follows:
 
   
2020
   
2019
 
Depreciation
 
$
18,006
    $
10,501
 
Provision for loan losses
 
 
171,984
     
(11,007
)
Other real estate owned allowance for loss
 
 
-
     
(57,828
)
Nonaccrual interest
 
 
2,752
     
31,691
 
Prepaid captive insurance premium
 
 
(76,855
)
   
21,373
 
Write-down of equity securities
 
 
(2,893
)
   
9,767
 
Capitol loss carryover
 
 
-
     
(5,300
)
Lease liability, net of right of use asset
 
 
9,372
     
(11,258
)
Purchase accounting adjustments
 
 
(29,982
)
   
-
 
Post-retirement benefits
 
 
58,947
     
(41,780
)
   
$
151,331
    $
(53,841
)
 
The components of the net deferred tax asset are as follows:
 
Deferred tax assets
               
Allowance for loan losses
 
$
809,860
    $
637,848
 
Other real estate owned allowance for loss
 
 
388,066
     
286,182
 
Write-down of equity securities
 
 
-
     
2,864
 
Capital loss carryover
 
 
5,300
     
5,300
 
Nonaccrual interest
 
 
4,620
     
-
 
Post-retirement benefits
 
 
603,390
     
544,442
 
Purchase accounting adjustments
 
 
392,341
     
-
 
Lease liability, net of right of use asset
 
 
55,347
     
45,975
 
   
 
2,258,924
     
1,522,611
 
Deferred tax liabilities
               
Prepaid captive insurance premium
 
 
371,894
     
295,039
 
Write-down of equity securities
 
 
15,606
     
-
 
Unrealized gain on securities available for sale
 
 
328,986
     
16,182
 
Depreciation
 
 
322,770
     
175,312
 
   
 
1,039,256
     
486,533
 
Net deferred tax asset
 
$
1,219,668
    $
1,036,078
 
 
The differences between the federal income tax rate in effect each year and the effective tax rate for the Company are reconciled as follows:
 
Statutory federal income tax rate
 
 
21.0
%
   
21.0
%
Increase (decrease) resulting from:
               
Federal tax-exempt income
 
 
(12.3
)
   
(7.0
)
State income taxes, net of federal income tax benefit
 
 
4.5
     
4.4
 
Nondeductible expenses
 
 
2.2
     
0.1
 
Other
 
 
-
     
0.1
 
   
 
15.4
%
   
18.6
%
 
 
Included in Federal tax-exempt income is the insurance premium revenue of the Insurance Subsidiary.
 
Our fiscal year
2016,
2017,
and
2018
U.S. consolidated federal tax returns are under audit by the IRS. As part of its audit, the IRS is reviewing the deductions related to, and the income generated by, the Insurance Subsidiary. The IRS has
not
completed its audit and has
not
communicated its position with respect to our tax treatment of the Insurance Subsidiary. If the IRS were to disagree with our tax treatment of the Insurance Subsidiary and we do
not
prevail in any challenge to this decision, then we could be required to pay taxes, interest, and penalties totaling approximately
$2.6
million as of
December 31, 2020.
Management believes that it is more than likely that the Company would prevail in any challenge to our tax treatment of the Insurance Subsidiary and, therefore, a reserve for uncertain tax positions has
not
been recorded.
 
The Company does
not
have other material uncertain tax positions and did
not
recognize any adjustments for unrecognized tax benefits. The Company remains subject to examination of income tax returns for the years ending after
December 31,
2016
.