Note 11 - Income Taxes

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 11 – Income Taxes

The components of the provision for income taxes are as follows:

Year ended December 31,	2014		2013
Current Federal income taxes	$	2,276	$	2,134
Deferred Federal income taxes		368		212
Net provision	$	2,644	$	2,346

At December 31, 2014 and 2013, the tax effects of temporary differences that represent the significant portion of deferred tax assets and liabilities are as follows:

December 31,	2014		2013
Deferred tax assets
Allowance for loan losses	$	2,720	$	3,035
Net unrealized holding losses on investment securities available-for-sale		-		1,456
Impaired securities		477		546
Non-credit OTTI on investment securities available-for-sale		204		302
Non-accrual interest income		446		569
OREO expenses		44		41
Deferred rent		64		55
Deferred revenue		27		33
Incurred but not reported (IBNR) medical expense		39		24
Other		48		13
Total deferred tax assets		4,069		6,074
Deferred tax liabilities
Depreciation		90		231
Mortgage servicing rights		171		176
Net unrealized holding gains on investment securities available-for-sale		671		-
Prepaid expenses		188		149
Other		24		-
Total deferred tax liabilities		1,144		556
Net deferred tax asset	$	2,925	$	5,518

The ability to realize deferred tax assets is dependent upon a variety of factors, including the generation of future taxable income, the existence of taxes paid and recoverable, the reversal of deferred tax liabilities and tax planning strategies. Based upon these and other factors, management believes it is more likely than not that QNB will realize the benefits of the above deferred tax assets. The net deferred tax asset is included in other assets on the consolidated balance sheet.

A reconciliation of the tax provision on income before taxes computed at the statutory rate of 34% and the actual tax provision was as follows:

Year ended December 31,	2014						2013
	Dollar			%			Dollar			%
Provision at statutory rate	$	3,958			34.0	%	$	3,651			34.0	%
Tax-exempt interest and dividend income		(1,212	)		(10.4	)		(1,249	)		(11.7	)
Bank-owned life insurance		(106	)		(0.9	)		(109	)		(1.0	)
Life insurance proceeds		(54	)		(0.5	)		-			-
Stock-based compensation expense		28			0.2			24			0.2
Other		30			0.3			29			0.3
Total provision	$	2,644			22.7	%	$	2,346			21.8	%