Note 7 - Income Taxes

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

7. INCOME TAXES

The Company's

effective tax rate

for the

three

and

nine

-month periods ended

September 30, 2020

, were

19.8%

 and

23.4%

, respectively, compared to 

48.6%

and 

14.6%

 for the same periods in

2019

, respectively. Effective rates are dependent upon components of pretax earnings and the related tax effects.

Income tax expense for the

three

and

nine

months ended

September 30, 2020

and

2019

, differed from the amounts computed by applying the U.S. federal tax rate of

21%

to pretax income from continuing operations as demonstrated in the following tables:

	For the Three-Months Ended
	September 30,
	2020			2019
Provision for income taxes at the statutory federal tax rates	$	105,820		$	(5,684	)
Increase (reduction) in taxes resulting from:
Dividends received deduction		(7,871	)		(8,955	)
Tax-exempt interest income		(15,531	)		(16,433	)
Proration of tax-exempt interest and dividends received deduction		5,715			5,939
Nondeductible expenses		11,523			8,404
Officer life insurance, net		263			3,579
Total	$	99,919		$	(13,150	)

	For the Nine-Months Ended
	September 30,
	2020			2019
Provision for income taxes at the statutory federal tax rates	$	(215,948	)	$	176,341
Increase (reduction) in taxes resulting from:
Dividends received deduction		(21,567	)		(28,482	)
Tax-exempt interest income		(46,795	)		(60,249	)
Proration of tax-exempt interest and dividends received deduction		16,683			21,775
Nondeductible expenses		25,751			24,450
Officer life insurance, net		896			(11,039	)
Total	$	(240,980	)	$	122,796

Management believes it is more likely than

not

that all deferred tax assets will be recovered as the result of future operations, which will generate sufficient taxable income to realize the deferred tax asset.

As of

September 30, 2020

and

December 31, 2019

, the Company does

not

have any capital or operating loss carryforwards. Periods still subject to IRS audit include

2016

through current year. There are currently

no

open tax exams.