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Note 12 - Income Taxes

12 Months Ended

Dec. 31, 2013

12.

INCOME TAXES

The provision for federal income taxes consists of:

(Dollar amounts in thousands)	2013		2012		2011

Current payable	$	1,556	$	1,660	$	693
Deferred		423		2		(97	)

Total provision	$	1,979	$	1,662	$	596

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)	2013		2012

Deferred tax assets:
Allowance for loan and lease loss	$	2,396	$	2,645
Net unrealized loss on securities		1,152		-
Supplemental retirement plan		247		218
Investment security basis adjustment		66		66
Nonaccrual interest income		472		508
Deferred origination fees, net		171		189
OREO adjustments		107		116
Accrued compensation		197		-
Net operating losses		-		86
Other		19		47
Gross deferred tax assets		4,827		3,875

Deferred tax liabilities:
Premises and equipment		503		434
Net unrealized gain on securities		-		2,777
FHLB stock dividends		225		225
Intangibles		304		256
Other		107		2
Gross deferred tax liabilities		1,139		3,694

Net deferred tax assets	$	3,688	$	181

No valuation allowance was established at December 31, 2013 and 2012, 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)	2013						2012						2011
				% of						% of						% of
				Pretax						Pretax						Pretax
	Amount			Income			Amount			Income			Amount			Income

Provision at statutory rate	$	3,062			34.0	%	$	2,700			34.0	%	$	1,606			34.0	%
Tax-free income		(1,138	)		(12.6	)		(1,095	)		(13.8	)		(1,071	)		(22.7	)
Nondeductible interest expense		45			0.5			48			0.6			61			1.3
Other		10			0.1			9			0.1			-			-

Actual tax expense and effective rate	$	1,979			22.0	%	$	1,662			20.9	%	$	596			12.6%

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, 2013 and December 31, 2012, 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 are 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, 2010.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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