Income Taxes

12 Months Ended

Dec. 31, 2013

Income Taxes

Income Taxes

Note 10: Income Taxes

The provision for income taxes includes the following components at December 31, 2013 and 2012:

	2013			2012
	(In thousands)
Taxes currently payable	$	642		$	7
Deferred income taxes		(9	)		371
Income tax expense	$	633		$	378

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is shown below:

	2013			2012
	(In thousands)
Computed at the statutory rate (34%)	$	914		$	714
Increase (decrease) resulting from
Tax exempt interest		(254	)		(284	)
Earnings on bank-owned life insurance		(36	)		(80	)
Other		9			28
Actual tax expense	$	633		$	378

The tax effects of temporary differences related to deferred taxes shown on the consolidated balance sheets were as follows:

	2013			2012
	(In thousands)
Deferred tax assets
Deferred loan origination fees	$	232		$	193
Allowance for loan losses		959			1,132
Real estate owned valuation		7			17
Pension adjustment		207			372
Reserve for uncollected interest		135			150
Benefit plan expenses		196			109
AMT credit carryover and low income housing credit		156			96
Total deferred tax assets		1,892			2,069
Deferred tax liabilities
Prepaid pension		(154	)		(128	)
Federal Home Loan Bank stock dividends		(1,217	)		(1,217	)
Book/tax depreciation differences		(398	)		(437	)
Financed loan fees		(111	)		(98	)
Unrealized gains on securities available-or-sale		(271	)		(1,190	)
Mortgage servicing rights		(93	)		(83	)
Purchase price adjustments – net		(13	)		(44	)
Total deferred tax liabilities		(2,257	)		(3,197	)
Net deferred tax liability	$	(365	)	$	(1,128	)

Prior to fiscal 1997, the Company was allowed a special bad debt deduction based on a percentage of earnings, generally limited to 8% of otherwise taxable income and subject to certain limitations based on aggregate loans and deposit account balances at the end of the year. This cumulative percentage of earnings bad debt deduction totaled approximately $2.7 million as of December 31, 2013. If the amounts that qualified as deductions for federal income taxes are later used for purposes other than bad debt losses, including distributions in liquidation, such distributions will be subject to federal income taxes at the then current corporate income tax rate. The amount of unrecognized deferred tax liability relating to the cumulative bad debt deduction was approximately $918,000 at December 31, 2013.