Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.1.9
Income Taxes
 12 Months Ended
Dec. 31, 2014
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
Note 7 – Income Taxes
 
At year-end, components of income tax expense consist of the following:
 
 
 
(Dollars in thousands)
 
 
 
2014
 
 
2013
 
Federal:
 
 
 
 
 
 
 
 
Current
 
$
1,787
 
 
$
1,844
 
Deferred
 
 
88
 
 
 
276
 
State:
 
 
 
 
 
 
 
 
Current
 
 
50
 
 
 
44
 
Deferred, net of valuation allowance
 
 
228
 
 
 
233
 
Income tax expense
 
$
2,153
 
 
$
2,397
 
  
Effective tax rates differ from the federal statutory rate of 34% applied to income before income taxes due to the following:
 
 
 
(Dollars in thousands)
 
 
 
2014
 
 
2013
 
Federal statutory rate
 
 
34
%
 
 
34
%
Tax expense at statutory rate
 
$
3,246
 
 
$
3,235
 
State tax, net of federal effect
 
 
183
 
 
 
183
 
Tax exempt income
 
 
(1,184
)
 
 
(940
)
Bank owned life insurance
 
 
(142
)
 
 
(129
)
Other
 
 
50
 
 
 
48
 
Total income tax expense
 
$
2,153
 
 
$
2,397
 
 
At December 31, the components of the net deferred tax asset recorded in the consolidated balance sheets are as follows:
 
 
 
(Dollars in thousands)
 
 
 
2014
 
 
2013
 
Deferred tax assets:
 
 
 
 
 
 
 
 
Bad debts
 
$
2,372
 
 
$
2,754
 
Deferred loan fees
 
 
73
 
 
 
96
 
Deferred compensation
 
 
484
 
 
 
483
 
Unrealized depreciation on securities available-for-sale, net
 
 
-
 
 
 
1,620
 
Net operating loss, state
 
 
557
 
 
 
642
 
Tax credits
 
 
85
 
 
 
78
 
Nonaccrual loan interest income
 
 
62
 
 
 
87
 
Restricted stock awards
 
 
43
 
 
 
35
 
REO writedowns
 
 
24
 
 
 
25
 
Unqualified deferred compensation plan
 
 
63
 
 
 
60
 
Post retirement benefit
 
 
52
 
 
 
52
 
Other-than-temporary impairment
 
 
92
 
 
 
92
 
Accrued vacation
 
 
98
 
 
 
111
 
Impairment on land
 
 
71
 
 
 
75
 
Purchase accounting
 
 
47
 
 
 
-
 
Other
 
 
1
 
 
 
19
 
Total deferred tax assets
 
 
4,124
 
 
 
6,229
 
 
 
 
 
 
 
 
 
 
Deferred tax liabilities:
 
 
 
 
 
 
 
 
Depreciation
 
 
(1,034
)
 
 
(1,232
)
Prepaids
 
 
(337
)
 
 
(270
)
Mortgage servicing rights
 
 
(79
)
 
 
(105
)
Deferred stock dividends
 
 
(109
)
 
 
(112
)
Unrealized appreciation on securities available-for-sale, net
 
 
(826
)
 
 
-
 
Post retirement unrealized gain
 
 
(23
)
 
 
(42
)
Other
 
 
(105
)
 
 
(83
)
Total deferred tax liabilities
 
 
(2,513
)
 
 
(1,844
)
Valuation allowance
 
 
(257
)
 
 
(288
)
Net deferred tax asset
 
$
1,354
 
 
$
4,097
 
 
At December 31, 2014, the Bancorp has a state net operating loss carry forward of approximately $12.7 million which will begin to expire in 2022 if not used. The Bancorp also has a state tax credit carry forward of approximately $128 thousand which will begin to expire in 2017 if not used. A valuation allowance of $257 thousand and $288 thousand was provided at December 31, 2014 and 2013, respectively, for the state net operating loss and state tax credit.
  
The Bancorp qualified under provisions of the Internal Revenue Code, to deduct from taxable income a provision for bad debts in excess of the provision for such losses charged to income in the financial statements, if any. Accordingly, retained earnings at December 31, 2014 and 2013 includes, approximately $6.0 million for which no provision for federal income taxes has been made. If, in the future, this portion of retained earnings is used for any purpose other than to absorb bad debt losses, federal income taxes would be imposed at the then applicable rate. The unrecorded deferred income tax liability on the above amounts was approximately $2.0 million at December 31, 2014 and 2013.
 
The Bancorp had no unrecognized tax benefits at any time during 2014 or 2013 and does not anticipate any significant increase or decrease in unrecognized tax benefits during 2015. Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is the Bancorp's policy to record such accruals through income tax accounts. No such accruals existed at any time during 2014 or 2013.
 
The Bancorp and its subsidiaries are subject to United States Federal income tax as well as income tax of the states of Indiana and Illinois. The Bancorp is no longer subject to examination by taxing authorities for the years before 2011 for federal and 2010 for state.