XML 38 R15.htm IDEA: XBRL DOCUMENT v2.4.0.6
Income Taxes
 12 Months Ended
Dec. 31, 2011
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
Note 9. Income Taxes

 

Cornerstone files consolidated income tax returns with its subsidiary. Under the terms of a tax-sharing agreement, the subsidiary’s allocated portion of the consolidated tax liability is computed as if they were reporting income and expenses to the Internal Revenue Service as a separate entity.

 

Income tax expense in the consolidated statements of operations for the years ended December 31, 2011, 2010 and 2009, consists of the following:

 

    2011     2010     2009  
                   
Current tax expense (benefit)   $ 77,279     $ (522,382 )   $ (6,637,188 )
Deferred tax expense (benefit) related to:                        
Allowance for loan losses     509,358       (1,030,423 )     1,241,231  
Other     (398,437 )     17,508       59,917  
                         
Income tax expense (benefit)   $ 188,200     $ (1,535,297 )   $ (5,336,040 )

 

The income tax expense is different from the expected tax expense computed by multiplying income before income tax expense by the statutory federal income tax rates. These differences are reconciled as follows:

 

    2011     2010     2009  
                   
Expected tax at statutory rates   $ 414,206     $ (2,122,558 )   $ (4,594,991 )
Increase (decrease) resulting from tax effect of:                        
State income taxes, net of federal tax benefit     52,263       (267,817 )     (579,780 )
New market tax credits     (277,500 )     (112,500 )     (150,000 )
Impairment of goodwill     -       973,131       -  
Other     (769 )     (5,553 )     (11,269 )
                         
Income tax expense (benefit)   $ 188,200     $ (1,535,297 )   $ (5,336,040 )

 

The components of the net deferred tax asset, included in other assets, are as follows:

 

    2011     2010  
Deferred tax assets:                
Deferred compensation   $ 110,724     $ 115,296  
Deferred loan fees     38,370       23,364  
Allowance for loan losses     1,215,767       1,725,125  
Foreclosed assets     1,711,688       1,361,629  
Net unrealized loss on securities available for sale     -       183,311  
                 
      3,076,549       3,408,725  
                 
Deferred tax liabilities:                
Depreciation     90,269       130,145  
Life insurance     204,386       204,386  
Net unrealized gain on securities available for sale     704,153       -  
Other     6,284       4,352  
                 
      1,005,092       338,883  
                 
Net deferred tax asset   $ 2,071,457     $ 3,069,842  

 

ASC Topic 740, “Income Taxes,” clarifies the accounting for uncertainty in tax positions. ASC Topic 740 requires that Cornerstone recognize in its financial statements, the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. Cornerstone recognized no interest and penalties assessed by taxing authorities on any underpayment of income tax for 2011, 2010 or 2009.