Note 10 - Income Taxes

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

10. Income Taxes

The components of income tax expense are as follows:

December 31, (In thousands)	2015			2014			2013
Currently payable	$	3,662		$	2,168		$	4,908
Deferred		1,631			3,931			(473	)
Total applicable to operations		5,293			6,099			4,435
Deferred tax (credited) charged to components of shareholders’ equity:
Unfunded status of postretirement benefits		(74	)		(382	)		1,589
Net unrealized securities (losses) gains		(1,052	)		4,737			(7,019	)
Total income taxes	$	4,167		$	10,454		$	(995	)

An analysis of the difference between the effective income tax rates and the statutory federal income tax rate follows.

December 31,	2015			2014			2013
Federal statutory rate		35.0	%		35.0	%		35.0	%
Changes from statutory rates resulting from:
Tax-exempt interest		(5.8	)		(5.2	)		(6.3	)
Nondeductible interest to carry tax-exempt obligations		.2			.2			.3
Premium income not subject to tax		(1.5	)		(1.2	)		(1.3	)
Company-owned life insurance		(1.6	)		(1.9	)		(1.8	)
Uncertain tax position		-			(.3	)		(.5	)
Other, net		(.2	)		.4			(.6	)
Effective tax rate on pretax income		26.1	%		27.0	%		24.8	%

The tax effects of the significant temporary differences that comprise deferred tax assets and liabilities at December 31, 2015 and 2014 are as follows:

December 31, (In thousands)	2015		2014
Assets
Allowance for loan losses	$	3,625	$	4,904
Deferred directors’ fees		242		253
Postretirement benefit obligations		5,665		5,164
Other real estate owned		1,968		2,418
Partnership investments		-		372
Self-funded insurance		230		214
Paid time off		756		723
Depreciation		1,440		1,163
Intangibles		2,432		2,813
Other		307		399
Total deferred tax assets		16,665		18,423
Liabilities
Unrealized gains on available for sale investment securities, net		1,734		2,786
Prepaid expenses		306		459
Federal Home Loan Bank stock dividends		1,035		1,087
Deferred loan fees		806		816
Lease financing operations		-		51
Partnership investments		65		-
Total deferred tax liabilities		3,946		5,199
Net deferred tax asset	$	12,719	$	13,224

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences at December 31, 2015.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(In thousands)	2015		2014
Balance at beginning of year	$	-	$	66
Reductions to tax positions of prior years		-		(66	)
Balance at end of year	$	-	$	-

At year-end 2015, no unrecognized tax benefits remain that would favorably affect the effective income tax rate in future periods.

The Company’s policy is to record the accrual of interest or penalties relative to unrecognized tax benefits, if any, in its income tax expense accounts. There was no amount accrued for interest at December 31, 2015 and 2014. No penalties were accrued or recorded during any year in the three years ended December 31, 2015.

The Company files U.S. federal and various state income tax returns. The Company is no longer subject to income tax examinations by taxing authorities for the years before 2012.