Note K - Income Taxes

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

K

- Income Taxes

On

December 22, 2017,

the TCJA was signed into law, which included several provisions that affected the Company’s federal income tax expense, which reduced the federal income tax rate to

21%

effective

January 1, 2018.

As a result of the rate reduction, the Company was required to re-measure, through income tax expense in the period of enactment, the deferred tax assets and liabilities using the enacted rate at which these items are expected to be recovered or settled. The re-measurement of the Company’s net deferred tax asset resulted in additional

2017

income tax expense of

$1,783.

The provision for income taxes consists of the following components:

	2019		2018			2017
Current tax expense	$	1,446	$	2,389		$	2,579
Deferred tax (benefit) expense		367		(134	)		1,907
Total income taxes	$	1,813	$	2,255		$	4,486

The source of deferred tax assets and deferred tax liabilities at

December 31:

	2019			2018
Items giving rise to deferred tax assets:
Allowance for loan losses	$	1,364		$	1,463
Unrealized loss on securities available for sale		----			568
Deferred compensation		1,700			1,580
Deferred loan fees/costs		110			119
Other real estate owned		4			434
Accrued bonus		204			280
Purchase accounting adjustments		24			61
Net operating loss		115			132
Lease liability		274			----
Other		346			257
Items giving rise to deferred tax liabilities:
Mortgage servicing rights		(77	)		(80	)
FHLB stock dividends		(676	)		(676	)
Unrealized gain on securities available for sale		(140	)		----
Prepaid expenses		(182	)		(191	)
Depreciation and amortization		(579	)		(656	)
Right-of-use asset		(274	)		----
Other		----			(3	)
Net deferred tax asset	$	2,213		$	3,288

The Company determined that it was

not

required to establish a valuation allowance for deferred tax assets since management believes that the deferred tax assets are likely to be realized through the future reversals of existing taxable temporary differences, deductions against forecasted income and tax planning strategies.

At

December 31, 2019,

the Company’s deferred tax asset related to Section

382

net operating loss carryforwards was

$550,

which will expire in

2026.

The difference between the financial statement tax provision and amounts computed by applying the statutory federal income tax rate of

21%

in

2019

and

2018

and

34%

in

2017

to income before taxes is as follows: 

	2019			2018			2017
Statutory tax	$	2,461		$	2,982		$	4,078
Effect of nontaxable interest		(336	)		(352	)		(514	)
Effect of nontaxable insurance premiums		(212	)		(218	)		(303	)
Income from bank owned insurance, net		(141	)		(142	)		(230	)
Effect of postretirement benefits		54			20			(78	)
Effect of nontaxable life insurance death proceeds		----			----			(175	)
Impact from TCJA		----			----			1,783
Effect of state income tax		100			33			70
Tax credits		(145	)		(217	)		(191	)
Milton Merger Costs		----			----			4
Other items		32			149			42
Total income taxes	$	1,813		$	2,255		$	4,486

At

December 31, 2019

and

December 31, 2018,

the Company had

no

unrecognized tax benefits. The Company does

not

expect the amount of unrecognized tax benefits to significantly change within the next

twelve

months. The Company did

not

recognize any interest and/or penalties related to income tax matters for the periods presented.

The Company is subject to U.S. federal income tax as well as West Virginia state income tax.  The Company is

no

longer subject to federal or state examination for years prior to

2016.

  The tax years

2016

-

2018

remain open to federal and state examinations.