Note 14: Income Taxes

12 Months Ended

Dec. 31, 2015

Notes

Note 14: Income Taxes

Note 14:    Income Taxes

The Company files a consolidated federal income tax return.  As of December 31, 2015 and 2014, retained earnings included approximately $17.5 million for which no deferred income tax liability had been recognized.  This amount represents an allocation of income to bad debt deductions for tax purposes only for tax years prior to 1988.  If the Bank were to liquidate, the entire amount would have to be recaptured and 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 $6.5 million at December 31, 2015 and 2014.

During the years ended December 31, 2015, 2014 and 2013, the provision for income taxes included these components:

	2015	2014	2013
(In Thousands)
Taxes currently payable	$20,234	$20,013	$17,013
Deferred income taxes	(4,670)	(6,260)	(8,839)
Income taxes	$15,564	$13,753	$8,174

The tax effects of temporary differences related to deferred taxes shown on the statements of financial condition were:

	December 31,
	2015	2014
(In Thousands)
Deferred tax assets
Allowance for loan losses	$13,848	$13,452
Interest on nonperforming loans	259	317
Accrued expenses	1,302	1,527
Write-down of foreclosed assets	4,056	3,970
Write-down of fixed assets	417	--
Other	--	350
	19,882	19,616
Deferred tax liabilities
Tax depreciation in excess of book depreciation	(6,483)	(6,443)
FHLB stock dividends	(1,549)	(1,494)
Partnership tax credits	(1,991)	(2,176)
Prepaid expenses	(515)	(508)
Unrealized gain on available-for-sale securities	(3,369)	(3,895)
Difference in basis for acquired assets and
liabilities	(435)	(4,738)
Other	(185)	(236)
	(14,527)	(19,490)
Net deferred tax asset	$5,355	$126

Reconciliations of the Company’s effective tax rates from continuing operations to the statutory corporate tax rates were as follows:

	2015	2014	2013
Tax at statutory rate	35.0%	35.0%	35.0%
Nontaxable interest and
dividends	(2.4)	(3.0)	(4.6)
Tax credits	(8.1)	(9.5)	(12.5)
State taxes	1.4	1.5	1.6
Other	(0.8)	--	--
	25.1%	24.0%	19.5%

The Company and its consolidated subsidiaries have not been audited recently by the Internal Revenue Service (IRS) or the State of Missouri with respect to income or franchise tax returns and, as such, tax years through December 31, 2005, have been closed without audit.  The Company, through one of its subsidiaries, is a partner in two partnerships currently under Internal Revenue Service examination for 2006 and 2007.  As a result, the Company’s 2006 and subsequent tax years remain open for examination.  The examinations of the partnerships have been advanced during 2015.  One of the partnerships has advanced to Tax Court because a settlement was not reached at the IRS appeals level.  The Company believes the partnership has a strong case and intends to defend its existing positions in Tax Court.  The other partnership is at the IRS appeals level.  The Company does not currently expect significant adjustments to its financial statements from these partnership examinations.

The Company is currently in administrative appeals with the State of Kansas for its 2010 through 2012 tax years.  The Company protested the state’s initial assessment and expects to have an informal conference with the Kansas Department of Revenue.  The Company does not currently expect significant adjustments to its financial statements from this state examination.