Note 11 - Income Taxes

12 Months Ended

Dec. 31, 2016

11.	INCOME TAXES

The consolidated provisions for income taxes for the years ended

December

31,

2016

and

2015

were as follows:

	2016		2015
	(Dollars in Thousands)
Federal
Current	$	30	$	10
Deferred		103		835
		133		845
State
Current		19		15
Deferred		17		91
		36		106
Total	$	169	$	951

The consolidated tax expense (benefit) differed from the amount computed by applying the federal statutory income tax rate of

34.0%,

as described in the

following table:

	2016			2015
	(Dollars in Thousands)
Income tax expense at federal statutory rate	$	475		$	1,206
Increase (decrease) resulting from:
Tax-exempt interest		(217	)		(240	)
Bank-owned life insurance		(106	)		(108	)
State income tax expense, net of federal income taxes		29			100
Other		(12	)		(7	)
Total	$	169		$	951

The tax effects of temporary differences that gave rise to significant portions of the

deferred tax assets and deferred tax liabilities as of

December

31,

2016

and

2015

are presented below:

	2016		2015
	(Dollars in Thousands)
Deferred tax assets:
Allowance for loan losses	$	1,792	$	1,395
Deferred compensation		1,603		1,617
Deferred commissions and fees		268		165
Impairment of other real estate owned		742		924
Federal net operating loss carryforwards		3,121		3,591
State net operating loss carryforwards		184		231
Federal alternative minimum tax and general business credits carryforwards		279		254
Unrealized loss on securities available-for-sale		872		—
Other		500		467
Total gross deferred tax assets		9,361		8,644
Deferred tax liabilities:
Premises and equipment		327		411
Limited partnerships		132		106
Unrealized gain on securities available-for-sale		—		312
Cash flow hedges		127		—
Other		41		17
Total gross deferred tax liabilities		627		846
Net deferred tax asset, included in other assets	$	8,734	$	7,798

As of

December

31,

2016

and

2015,

the Company had

$3.6

million and

$4.1

million related to federal and state net operating loss and tax credit carryforwards that can be used to offset income in future periods and reduce

income taxes payable in those future periods. The majority of these carryforwards will not begin to expire until

2032.

The remaining net deferred tax assets, which totaled

$5.2

million and

$3.7

million as of

December

31,

2016

and

2015,

respectively, do not have an expiration date.

The Company

’s determination of the realization of net deferred tax assets at

December

31,

2016

and

2015

was based on management’s assessment of all available positive and negative evidence. As of both

December

31,

2016

and

December

31,

2015,

the Company was not in a

three

-year cumulative loss position. In addition, the Company has positive evidence supporting the realization of its net deferred tax assets as of

December

31,

2016,

including the reversal of taxable temporary differences, a strong history of earnings, and tax planning strategies, including the conversion of tax-exempt investments to taxable investments to generate future taxable income to prevent tax attributes, such as net operating losses, from expiring unutilized. Accordingly, a valuation allowance was not established as of

December

31,

2016

December

31,

2015.

The Company files a consolidated income tax return with the federal government and the State of Alabama. ALC files a Mississippi state income tax

return related to operations from its Mississippi offices. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and the states in which it files for the years ended

December

31,

2013

through

2016.

As of

December

31,

2016,

the Company had

unrecognized tax benefits related to federal or state income tax matters and does not anticipate any material increase or decrease in unrecognized tax benefits relative to any tax positions taken prior to

December

31,

2016.

As of

December

31,

2016,

the Company had accrued no interest and no penalties related to uncertain tax positions.