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Note 13 - Income Taxes
 12 Months Ended
Dec. 31, 2016
Notes to Financial Statements  
Income Tax Disclosure [Text Block]
(13)
         
INCOME TAXES
 
The components of income tax expense for the years ended
December
31,
2016
and
2015
were as follows:
 
(In thousands)   2016   2015
         
Current   $
2,303
     $
1,292
  
Deferred    
220
      
672
  
                 
Totals   $
2,523
     $
1,964
  
 
The reconciliation of income tax expense for the years ended
December
31,
2016
and
2015,
with the amount which would have been provided at the federal statutory rate of
34%
follows:
 
(In thousands)   2016   2015
         
Provision at federal statutory tax rate   $
3,196
     $
2,440
  
State income tax-net of federal tax benefit    
111
      
107
  
Change in state statutory tax rate    
(4
 )    
(4
 )
Tax-exempt interest income    
(416
 )    
(405
 )
Bank-owned life insurance income    
(62
 )    
(83
 )
Captive insurance net premiums    
(294
 )    
(322
 )
Nondeductible acquisition expense    
-
      
219
  
Other    
(8
 )    
12
  
                 
Totals   $
2,523
     $
1,964
  
                 
Effective tax rate    
26.8
 %    
27.4
 %
 
Significant components of the deferred tax assets and liabilities as of
December
31,
2016
and
2015
were as follows:
 
(In thousands)   2016   2015
         
Deferred tax assets (liabilities):                
Deferred compensation plans   $
200
     $
205
  
Allowance for loan losses    
876
      
872
  
Accrued expenses    
45
      
155
  
Unrealized loss on securities available for sale    
1,335
      
-
  
Other    
353
      
351
  
Deferred tax assets    
2,809
      
1,583
  
                 
Depreciation    
(632
 )    
(550
 )
Deferred loan fees and costs    
(261
 )    
(186
 )
FHLB stock dividends    
(56
 )    
(262
 )
Prepaid expenses    
(295
 )    
(258
 )
Acquisition purchase accounting adjustments    
(304
 )    
(181
 )
Unrealized gain on securities available for sale    
-
      
(261
 )
Deferred tax liabilities    
(1,548
 )    
(1,698
 )
                 
Net deferred tax asset (liability)   $
1,261
     $
(115
 )
 
Tax laws enacted in
2013
and
2014
decreased the Indiana financial institutions franchise tax rate beginning in
2014
and ending in
2023.
Deferred taxes have been adjusted to reflect the newly enacted rates and the period in which temporary differences are expected to reverse.
 
At
December
31,
2016
and
2015,
the Company had
no
liability for unrecognized income tax benefits related to uncertain tax positions and does not anticipate any increase in the liability for unrecognized tax benefits during the next
twelve
months. The Company believes that its income tax positions would be sustained upon examination and does
not
anticipate any adjustments that would result in a material change to its financial position or results of operations. The Company files consolidated U.S. federal income tax returns and Indiana state income tax returns. Returns filed in these jurisdictions for tax years ended on or after
December
31,
2013
are subject to examination by the relevant taxing authorities. Each entity included in the consolidated federal and Indiana state income tax returns filed by the Company are charged or given credit for the applicable tax as though separate returns were filed.
 
Retained earnings of the Bank at
December
31,
2015
and
2014
include approximately
$
1.0
million for which no deferred federal income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions as of
December
31,
1987
for tax purposes only. Reduction of such allocated amounts for purposes other than tax bad debt losses, including redemption of bank stock, excess dividends or loss of “bank” status, would create income for tax purposes only, subject to the then-current corporate income tax rate. The unrecorded deferred liability on these amounts was approximately
$
354,000
at
December
31,
2015
and
2014.