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Note 10 - Income Taxes | 12 Months Ended
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Dec. 31, 2014
Income Tax Disclosure [Abstract] |
Income Tax Disclosure [Text Block] |
Note 10. | Income Taxes
The table below presents the components of our federal and state income tax benefit for 2014, 2013, and 2012. Federal and State Income Tax Benefit
(in thousands) |  | Year Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Current |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (15,979 | ) |  | $ | - |  |  | $ | - |
State |  |  | 268 |  |  |  | (21 | ) |  |  | - |
Total |  |  | (15,711 | ) |  |  | (21 | ) |  |  | - |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 839 |  |  |  | (318 | ) |  |  | - |
State |  |  | 122 |  |  |  | - |  |  |  | - |
Total |  |  | 961 |  |  |  | (318 | ) |  |  | - |
Benefit for income taxes |  | $ | (14,750 | ) |  | $ | (339 | ) |  | $ | - |
The income tax benefit for 2014 is due to the release of the valuation allowance against the net deferred tax assets in September 30, 2014. The table below presents a reconciliation between our federal statutory income tax rate and our effective tax rate for 2014, 2013, and 2012. Reconciliation of Statutory to Effective Tax Rate
|  | Year Ended December 31, |
(in thousands) |  | 2014 |  |  | 2013 |  |  | 2012 |
Income taxes at |  |  |  |  |  |  |  |  |  |  |  |
statutory Federal rate |  | $ | 326 |  |  | $ | (2,593 | ) |  | $ | (182 | )
State taxes, net of Federal benefit |  |  | 48 |  |  |  | (21 | ) |  |  | - |
Nondeductible expenses |  |  | 175 |  |  |  | 6 |  |  |  | 5 |
Change in cash surrender value of life insurance |  |  | - |  |  |  | (178 | ) |  |  | (176 | )
Taxes on BOLI income |  |  | 1,701 |  |  |  | - |  |  |  | - |
Valuation allowance |  |  | (16,812 | ) |  |  | - |  |  |  | - |
Tangible Property Review IRC Sec 481(a) |  |  | (644 | ) |  |  |  |  |  |  |  |
Current Year Change in valuation allowance |  |  | (39 | ) |  |  | 2,447 |  |  |  | 329 |
Other |  |  | 495 |  |  |  | - |  |  |  | 24 |
Total benefit for income taxes |  | $ | (14,750 | ) |  | $ | (339 | ) |  | $ | - |
In 2014, our effective tax rate is (1538) % which is different from the statutory rate of 34% due to the release of the valuation allowance against our net deferred tax assets. In 2013 and 2012, our effective tax rate differs from the statutory rate due to the valuation allowance on the entire net deferred tax assets and the recognition of uncertain tax positions. Deferred Tax Assets and Liabilities In September 2014, we released our valuation allowance previously recorded on the net deferred tax asset. Deferred tax assets are created when expenses are recognized for financial reporting purposes prior to the corresponding recognition of expenses for tax reporting purposes; and/or income is recognized for tax reporting purposes prior to the corresponding recognition of income for financial reporting purposes. The table below presents the balance of significant deferred tax assets, liabilities, and the valuation allowance at December 31, 2014, 2013 and 2012.
(in thousands) |  | 2014 |  |  | 2013 |  |  | 2012 |
Deferred tax assets: |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses |  | $ | 1,918 |  |  | $ | 2,213 |  |  | $ | 2,343 |
Nonaccrual interest |  |  | 1,508 |  |  |  | 1,474 |  |  |  | 1,325 |
Depriciation of premises and equipment |  |  | 523 |  |  |  | 1,276 |  |  |  | 1,074 |
Accrued expenses |  |  | 292 |  |  |  | 376 |  |  |  | 225 |
Share-based Compensation |  |  | - |  |  |  | - |  |  |  | 72 |
OREO Writedowns |  |  | 63 |  |  |  | - |  |  |  | - |
Capital loss carryover |  |  | 572 |  |  |  | 572 |  |  |  | 572 |
State NOL carryforward benefit |  |  | 3,435 |  |  |  | 3,613 |  |  |  | 3,237 |
Federal NOL carryforward benefit |  |  | 17,372 |  |  |  | 18,427 |  |  |  | 15,850 |
NOL write-off for § 382 Limitation |  |  | (10,382 | ) |  |  | (10,382 | ) |  |  | (10,382 | )
Federal AMT benefit estimate |  |  | - |  |  |  | - |  |  |  | 318 |
Unrealized loss AFS |  |  | 176 |  |  |  | 462 |  |  |  | 251 |
Other |  |  | 21 |  |  |  | 37 |  |  |  | 154 |
Gross deferred tax assets |  |  | 15,498 |  |  |  | 18,068 |  |  |  | 15,039 |
Valuation allowance |  |  | (572 | ) |  |  | (18,068 | ) |  |  | (15,039 | )
Deferred tax assets, net of valuation allowance |  |  | 14,926 |  |  |  | - |  |  |  | - |
Deferred tax asset, net |  | $ | 14,926 |  |  | $ | - |  |  | $ | - |
At December 31, 2014, the Bank had a net operating loss carry forwards of $10.3 million to offset future taxable income which will expire over varying periods beginning in 2029 through 2032. Valuation Allowance against net Deferred Tax Assets The Bank had approximately $18.1 million of net deferred tax assets which, prior to 2014, was subject to a valuation allowance because the realization of the net deferred tax assets was not more likely than not. In light of the Bank’s performance over the previous four quarters, Management determined that it was more likely than not that the Bank would be able to realize substantially all of its deferred tax assets and, therefore, a valuation allowance was no longer required. In the third quarter of fiscal year 2014, the Bank released 96.7% of its valuation allowance previously recorded on its net deferred tax assets which resulted in a credit to income tax expense, partially offset by the current income tax expense for the year. The positive evidence that outweighed the negative evidence in Management’s assessment included, but was not limited to, the following:
| ● | Strong positive trend in financial performance over the previous four quarters
| ● | Forecasted 2015 and future period taxable income
| ● | Net Operating Loss carry-forwards do not begin to expire until 2029
| ● | A significant improvement in the quality of the loan portfolio
| ● | Favorable changes in operations which permanently reduce operating expenses.
The Bank will continue to evaluate its ability to realize its net deferred tax assets. Future evidence may prove that it is more likely than not that a portion of the deferred tax assets will not be realized at which point a valuation allowance may be reestablished. At December 31, 2014 the Bank had no unrecognized tax benefits. The Bank does not expect the total amount of unrecognized tax benefits to significantly change over the next twelve months.

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- 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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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