Note 7 - Income Taxes

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

7.

Income Taxes

The following table presents a reconciliation between the effective income tax expense and the income tax expense that would have been provided at the federal statutory tax rate of

21.0%

 for the

three

months ended

March 31, 2020

and

2019

, respectively.

	For the Three Months Ended March 31,
	2020						2019
(dollars in thousands)	Amount			%			Amount			%
Provision at statutory tax rates	$	528			21.00	%	$	670			21.00	%
Add (deduct):
Tax effects of tax free interest income		(106	)		(4.22	)%		(106	)		(3.32	)%
Non-deductible interest expense		5			0.19	%		5			0.15	%
Bank-owned life insurance		(27	)		(1.07	)%		(28	)		(0.86	)%
Other items, net		52			2.07	%		14			0.43	%
Income tax provision	$	452			17.97	%	$	555			17.40	%

FNCB had net deferred tax assets of

$4.9

 million at

March 31, 2020

,

of which

$3.9

 million was related to approximately 

$20.0

million in net operating loss carryovers. At

December 31, 2019

,

FNCB’s net deferred tax assets were

$6.3

 million.

Management evaluates the carrying amount of its deferred tax assets on a quarterly basis, or more frequently if necessary, in accordance with guidance set forth in ASC Topic

740

“Income Taxes,” and applies the criteria in the guidance to determine whether it is more likely than

not

that some portion, or all, of the deferred tax asset will

not

be realized within its life cycle, based on the weight of available evidence. In evaluating available evidence, management considers, among other factors, historical financial performance, expectation of future earnings, the ability to carry back losses to recoup taxes previously paid, length of statutory carry forward periods, experience with operating loss and tax credit carry forwards

not

expiring unused, tax planning strategies and timing of reversals of temporary differences. In assessing the need for a valuation allowance, management carefully weighs both positive and negative evidence currently available. The weight given to the potential effect of positive and negative evidence must be commensurate with the extent to which it can be objectively verified. If management determines, based on available evidence, both positive and negative, that it is more likely than

not

that some portion or all of the deferred tax asset will

not

be realized in future periods, a valuation allowance is calculated and recorded. These determinations are inherently subjective and depend upon management’s estimates and judgments used in their evaluation of both positive and negative evidence.

Management performed an evaluation of FNCB’s deferred tax assets at

March 31, 2020

taking into consideration all available positive and negative evidence at that time. Based on this evaluation, management believes that FNCB’s future taxable income will be sufficient to utilize deferred tax assets. Accordingly, a valuation allowance for deferred tax assets was

not

required at

March 31, 2020

and 

December 31, 2019

.