Note 12 - Income Taxes

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

1

2

.  Income Taxes

The Company and Bank file a consolidated federal income tax return on a calendar year basis.

Income tax expense is summarized as follows:

	Years Ended December 31,
	2019			2018
Federal:
Current	$	437,095		$	363,531
Deferred		26,658			71,504
		463,753			435,035
State:
Current		275,220			270,109
Deferred		(13,470	)		(25,928	)
		261,750			244 181
	$	725,503		$	679,216

	Years Ended December 31,
	2019			2018
Expected income taxes	$	559,199		$	561,440
Income tax effect of:
State taxes, net of federal tax benefit		206,783			192,903
Tax exempt interest		(79,712	)		(77,569	)
Other		39,233			2,442

$ 725,503 $ 679,216

The components of the net deferred tax asset are as follows:

	December 31,
	2019			2018
Deferred tax assets
Unrealized loss on securities available for sale	$	-		$	12,393
Employee benefit plans		814,181			842,860
Allowance for loan losses		837,225			748,905
Net operating loss carryforwards		89,940			135,576
Loans		71,588			76,599
Purchase accounting - acquisition expenses		75,064			82,570
Other		89,910			108,505
		1,977,908			2,007,408
Deferred tax liabilities
Unrealized gain on securities available for sale		(129,399	)		-
Prepaid expenses		(30,808	)		(27,229	)
MRP compensation		(12,561	)		-
Origination of mortgage servicing rights		(13,522	)		(17,048	)
Core deposit intangible		(48,457	)		(64,990	)
		(234,747	)		(109,267	)
Net deferred tax asset	$	1,743 161		$	1,898,141

Stockholders’ equity at

December 31, 2019

and

2018

includes approximately

$2.3

million for which

no

federal income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions for tax purposes only. Reductions of amounts so allocated for purposes other than bad debt losses or adjustments arising from carry-back of net operating losses 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

$646,000

at

December 31, 2019

and

2018,

respectively.

At

December 31, 2019

and

2018,

the Company had federal net operating loss carry forwards of approximately

$0.4

million and

$0.6

million, respectively. Per Internal Revenue Code Section

382

limitations, our use of the acquired federal net operating loss carry forward of approximately

$0.4

million at

December 31, 2019

is limited to approximately

$0.2

million per year until fully realized. The federal net operating loss carry forwards will begin to expire in

2034.

Management believes that it is more likely than

not

that the deferred tax assets included in the accompanying consolidated balance sheets will be fully utilized. We have determined that

no

valuation allowance is required as of

December 31, 2019,

although there is

no

guarantee that those assets will be fully recognizable in future periods.