Note 13 - Income Taxes

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

13. INCOME TAXES

The provision for federal income taxes consists of:

(Dollar amounts in thousands)	2016			2015		2014
Current payable	$	1,998		$	1,004	$	2,146
Deferred		(93	)		558		(154	)
Total provision	$	1,905		$	1,562	$	1,992

The tax effects of deductible and taxable temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:

(Dollar amounts in thousands)	2016		2015
Deferred tax assets:
Allowance for loan and lease losses	$	2,243	$	2,171
Supplemental retirement plan		382		371
Investment security basis adjustment		66		66
Nonaccrual interest income		456		415
Deferred origination fees, net		-		12
OREO adjustments		26		92
Accrued compensation		261		234
Other		82		23
Gross deferred tax assets		3,516		3,384
Deferred tax liabilities:
Premises and equipment		445		514
Net unrealized gain on securities		618		1,233
FHLB stock dividends		225		225
Intangibles		449		401
Mortgage servicing rights		103		68
Deferred origination fees, net		63		-
Other		6		44
Gross deferred tax liabilities		1,909		2,485
Net deferred tax assets	$	1,607	$	899

No

valuation allowance was established at

December

31,

2016

and

2015,

in view of the Company’s ability to carry back to taxes paid in previous years and certain tax strategies, coupled with the anticipated future taxable income as evidenced by the Company's earnings potential.

The reconciliation between the federal statutory rate and the Company’s effective consolidated income tax rate is as follows:

(Dollar amounts in thousands)	2016						2015						2014
				% of						% of						% of
				Pretax						Pretax						Pretax
	Amount			Income			Amount			Income			Amount			Income
Provision at statutory rate	$	2,829			34.0	% $		2,866			34.0	% $		3,119			34.0	%
Tax-free income		(1,177	)		(14.1	)		(1,347	)		(15.9	)		(1,187	)		(12.9	)
Nondeductible interest expense		32			0.4			34			0.4			37			0.4
Nondeductible merger-related expense		186			2.2			-			0.0			-			0.0
Other		35			0.4			9			0.0			23			0.2
Actual tax expense and effective rate	$	1,905			22.9	% $		1,562			18.5	% $		1,992			21.7	%

ASC

740

‐

10

prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more

‐

likely

‐

than

‐

not recognition threshold is measured at the largest amount of benefit that is greater than

50

percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more

‐

likely

‐

than

‐

not recognition threshold should be recognized in the

first

subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more

‐

likely

‐

than

‐

not recognition threshold should be derecognized in the

first

subsequent financial reporting period in which that threshold is no longer met.

At

December

31,

2016

and

December

31,

2015,

the Company had

no

unrecognized tax benefits. The Company does not expect the total amount of unrecognized tax benefits to significantly increase within the next

12

months. The Company recognizes interest and penalties on unrecognized tax benefits as a component of income tax expense.

The Company and the Bank are subject to U.S. federal income tax as well as an income tax in the state of Ohio, and the Bank is subject to a capital

‐

based franchise tax in the state of Ohio. The Company and the Bank are no longer subject to examination by taxing authorities for years before

December

31,

2013.