XML 42 R16.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Tax Disclosure [Text Block] | Note 8 – Income Taxes At year-end, components of income tax expense consist of the following:
|  | (Dollars in thousands) |
|  | 2018 |  |  | 2017 |
Federal: |  |  |  |  |  |  |  |
Current |  | $ | 1,218 |  |  | $ | 1,898 |
Deferred |  |  | 129 |  |  |  | 275 |
Revaluation of net deferred tax asset |  |  | - |  |  |  | 517 |
State: |  |  |  |  |  |  |  |
Current |  |  | (44 | ) |  |  | 77 |
Deferred, net of valuation allowance |  |  | 127 |  |  |  | 102 |
Income tax expense |  | $ | 1,430 |  |  | $ | 2,869 |
Effective tax rates differ from the federal statutory rate of 21% for 2018 and 34% for 2017 applied to income before income taxes due to the following:
|  | (Dollars in thousands) |
|  | 2018 |  |  | 2017 |
Federal statutory rate |  |  | 21 | % |  |  | 34 | %
Tax expense at statutory rate |  | $ | 2,260 |  |  | $ | 4,022 |
State tax, net of federal effect |  |  | 66 |  |  |  | 118 |
Tax exempt income |  |  | (778 | ) |  |  | (1,302 | )
Bank owned life insurance |  |  | (102 | ) |  |  | (156 | )
Captive insurance |  |  | (169 | ) |  |  | (307 | )
Revaluation of net deferred tax asset |  |  | - |  |  |  | 517 |
Non-deductible transaction costs |  |  | 99 |  |  |  | - |
Other |  |  | 54 |  |  |  | (23 | )
Total income tax expense |  | $ | 1,430 |  |  | $ | 2,869 |
At December 31, the components of the net deferred tax asset recorded in the consolidated balance sheets are as follows:
|  | (Dollars in thousands) |
|  | 2018 |  |  | 2017 |
Deferred tax assets: |  |  |  |  |  |  |  |
Bad debts |  | $ | 1,859 |  |  | $ | 1,885 |
Deferred loan fees |  |  | 49 |  |  |  | 32 |
Deferred compensation |  |  | 322 |  |  |  | 332 |
Unrealized depreciation on securities available-for-sale, net |  |  | 743 |  |  |  | - |
Net operating loss |  |  | 1,373 |  |  |  | 290 |
Tax credits |  |  | 147 |  |  |  | 99 |
Nonaccrual loan interest income |  |  | 62 |  |  |  | 71 |
Share based compensation |  |  | 185 |  |  |  | 133 |
REO writedowns |  |  | 195 |  |  |  | 25 |
Unqualified deferred compensation plan |  |  | 54 |  |  |  | 51 |
Other-than-temporary impairment |  |  | 52 |  |  |  | 57 |
Accrued vacation |  |  | 56 |  |  |  | 59 |
Impairment on land |  |  | 48 |  |  |  | 48 |
Other |  |  | 78 |  |  |  | 15 |
Total deferred tax assets |  |  | 5,223 |  |  |  | 3,097 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation |  |  | (550 | ) |  |  | (641 | )
Prepaids |  |  | (254 | ) |  |  | (237 | )
Mortgage servicing rights |  |  | (68 | ) |  |  | (26 | )
Deferred stock dividends |  |  | (76 | ) |  |  | (65 | )
Unrealized appreciation on securities available-for-sale, net |  |  | - |  |  |  | (188 | )
Purchase accounting |  |  | (118 | ) |  |  | (100 | )
Other |  |  | (191 | ) |  |  | (209 | )
Total deferred tax liabilities |  |  | (1,257 | ) |  |  | (1,466 | )
Valuation allowance |  |  | (87 | ) |  |  | (80 | )
Net deferred tax asset |  | $ | 3,879 |  |  | $ | 1,551 |
On December 22, 2017, the Tax Cuts and Jobs Act (the "Act") was signed into law. Among other changes, the Act introduced tax reform that reduced the top corporate federal income tax rate from 35% to a flat rate of 21% effective January 1, 2018. As a result of these changes made by the Act, the Bancorp revalued its net deferred tax asset, as deferred tax assets and liabilities are to be measured using enacted rates expected to apply in years in which the deferred tax assets and liabilities are expected to be recovered or settled. The revaluation of the deferred tax assets and liabilities are adjusted through income tax expense in the year the changes in tax laws are enacted. The revaluation of the net deferred tax asset resulted in additional income tax expense of $517 thousand for 2017. The $517 thousand tax expense was $628 thousand net of a tax benefit of $111 thousand relating to the other comprehensive income revaluation adjustment. At December 31, 2018, the Bancorp has an Indiana net operating loss carry forward of approximately $7.6 million which will begin to expire in 2024 if not used. The Bancorp also has a state tax credit carry forward of approximately $110 thousand which began to expire in 2017 and will continue to expire if not used. Management has concluded that the Indiana net operating loss will be fully utilized and therefore no valuation allowance is necessary on the state net operating loss. A valuation allowance remains in place on the state tax credit carryforward. A valuation allowance of $87 thousand and $80 thousand was provided at December 31, 2018 and 2017, respectively, for the state tax credits. The Bancorp acquired $3.3 million of federal net operating loss carryforwards, $59 thousand of federal AMT credits, and $6.7 million of Illinois net operating loss carryforwards with the acquisition of First Personal during 2018 of which $2.2 million of the federal losses expire in years ranging from 2028 to 2035, $1.1 million of the federal losses do not expire, $59 thousand of federal AMT credits that do not expire, and the Illinois losses expire in years ranging from 2019 to 2029. Under Section 382 of the Internal Revenue Code, the annual limitation on the use of the federal losses is $362 thousand while there is no limitation on the use of the Illinois losses. Management has determined that all of the losses are more likely than not to be utilized before expiration. At December 31, 2018, $3.2 million of the federal loss carryforwards, $59 thousand of federal AMT credits, and $5.2 million of the Illinois loss carryforward remain; the benefit of which is reflected in deferred tax assets. 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, 2018, and 2017 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 $1.3 million at both December 31, 2018, and 2017. The Bancorp had no unrecognized tax benefits at any time during 2018 or 2017 and does not anticipate any significant increase or decrease in unrecognized tax benefits during 2019. 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 2018 or 2017. The Bancorp and its subsidiaries are subject to US 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 2015.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration