Note 8 - Accounting for Income Taxes and Uncertainties

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 8. ACCOUNTING FOR INCOME TAXES AND UNCERTAINTIES

Our provision for income taxes includes both federal and state income taxes and reflects the application of federal and state statutory rates to the Company's income before taxes. The principal difference between statutory tax rates and our effective tax rate is the benefit derived from investing in tax-exempt securities, federal tax credits afforded through our investments in qualified partnerships and bank-owned life insurance.

Income taxes are accounted for using the asset and liability method. Under this method, a deferred tax asset or liability is determined based on the enacted tax rates, which will be in effect when the differences between the financial statement carrying amounts and tax basis of existing assets and liabilities are expected to be reported in our income tax returns. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established to reduce the net carrying amount of deferred tax assets if it is determined to be more likely than not, that all or some portion of the potential deferred tax asset will not be realized.

We apply the provisions of FASB ASC 740,

Income Taxes

, relating to the accounting for uncertainty in income taxes. We periodically review our income tax positions based on tax laws and regulations, and financial reporting considerations, and record adjustments as appropriate. This review takes into consideration the status of current taxing authorities’ examinations of our tax returns, recent positions taken by the taxing authorities on similar transactions, if any, and the overall tax environment. Our uncertain tax positions were nominal in amount as of June 30, 2016.