Note 7 - Income Taxes

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

7. INCOME TAXES

The Company’s effective tax rate for the nine month periods ended September 30, 2022 was 21.1% compared to 21.6% for the same period in 2021. Effective rates are dependent upon components of pretax earnings and losses and the related tax effects.

Income tax expense for the nine month periods ended September 30, 2022 and 2021 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 table:

	For the Three-Months Ended
	September 30,
	2022			2021
Provision for income taxes at the statutory federal tax rates	$	170,279		$	114,800
Increase (reduction) in taxes resulting from:
Dividends received deduction		(10,010	)		(8,657	)
Tax-exempt interest income		(12,011	)		(14,890	)
Proration of tax-exempt interest and dividends received deduction		(2,217	)		5,685
Nondeductible expenses		32,766			25,302
Officer life insurance, net		2,307			165
Total	$	181,114		$	122,405

	For the Nine-Months Ended
	September 30,
	2022			2021
Provision for income taxes at the statutory federal tax rates	$	(974,378	)	$	575,332
Increase (reduction) in taxes resulting from:
Dividends received deduction		(32,408	)		(24,732	)
Tax-exempt interest income		(38,323	)		(44,437	)
Proration of tax-exempt interest and dividends received deduction		9,581			16,748
Nondeductible expenses		60,177			67,397
Officer life insurance, net		(5,375	)		498
Total	$	(980,726	)	$	590,806

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, 2022 and December 31, 2021, the Company does not have any capital or operating loss carryforwards. Periods still subject to IRS audit include 2018 through current year. Unrealized losses on the investment portfolio during 2022 have moved the Company from a net deferred tax liability position as of  December 31, 2021 to a net deferred tax asset position as of September 30, 2022. There are currently no open tax exams.