Note 4 - Income Taxes

9 Months Ended

Sep. 30, 2015

4.	INCOME TAXES

The effective tax rate for the three-month period ended September 30, 2015 increased to 36.2% compared to 35.9% for the same period in 2014. The effective tax rate for the nine-month period ended September 30, 2015 increased to 37.2% compared to 35.3% for the same period in 2014. This increase was primarily due to a capital loss valuation allowance and higher projected state tax rates due to legislative changes and growth within the Company. The capital loss valuation was recorded due to the write-off of the purchase option of a potential acquisition that was not exercised on March 31, 2015. The option was extended until June 30, 2015 and terminated unexercised in June 2015. The Company is currently under a United States federal tax examination for the tax year ended December 31, 2013.

The unrecognized tax benefit as of September 30, 2015, was $394,000, excluding interest of $9,000 and penalties of $7,000. Of this amount, $207,000 represents the net unrecognized tax benefits that, if recognized, would favorably impact the effective income tax rate. The remaining $187,000 at September 30, 2015 would have no impact on the effective tax rate, if recognized. The Company accrues interest and penalties related to uncertain tax position in the statements of income as income tax expense.