XML 101 R21.htm IDEA: XBRL DOCUMENT v2.4.0.6
Income Taxes
 12 Months Ended
Dec. 31, 2012
Income Taxes  
Income Taxes Text Block

NOTE 13: INCOME TAXES

 

For the years ended December 31, 2012, 2011, and 2010 the components of income tax expense (benefit) from continuing operations are presented below.

 

    Year ended December 31
(Dollars in thousands)201220112010
Current income taxes:        
 Federal$737  72  1,290
 State 58  353  285
  Total current income taxes 795  425  1,575
Deferred income taxes:        
 Federal 472  (344)  (698)
 State 152  (24)  (79)
  Total deferred income taxes 624  (368)  (777)
           
 Total income tax expense $1,419  57  798

Total income tax expense differs from the amounts computed by applying the statutory federal income tax rate of 34% to earnings before income taxes. A reconciliation of the differences for the years ended December 31, 2012, 2011, and 2010, is presented below.

     2012 2011 2010
       Percent of    Percent of    Percent of 
       pre-tax    pre-tax    pre-tax 
(Dollars in thousands)  Amount earnings  Amount earnings  Amount earnings 
Earnings before income taxes $8,182    5,595    6,144   
                   
Income taxes at statutory rate  2,782 34.0% 1,902 34.0% 2,089 34.0%
 Tax-exempt interest  (997) (12.2)  (1,028) (18.4)  (1,042) (17.0) 
 State income taxes, net of                 
  federal tax effect  179 2.2  183 3.3  151 2.5 
 Low-income housing credit   —  —  (891) (15.9)  (220) (3.6) 
 Bank owned life insurance  (151) (1.8)  (157) (2.8)  (154) (2.5) 
 Change in valuation allowance  (505) (6.2)   —  —   —  — 
 Other  111 1.4  48 0.9  (26) (0.4) 
                   
Total income tax expense  $1,419 17.3% 57 1.0% 798 13.0%

The Company had net deferred tax assets of $1.2 million and $2.4 million at December 31, 2012 and 2011, respectively. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2012 and 2011 are presented below:

 

    December 31
(Dollars in thousands)20122011
Deferred tax assets:     
 Allowance for loan losses$2,480  2,553
 Premises and equipment  —  3
 Other-than-temporary impairment on securities 464  1,209
 Write-downs on other real estate owned 489  1,182
 Capital loss carry-forwards  —  505
 Tax credit carry-forwards 932  277
 Other 670  333
  Total deferred tax assets 5,035  6,062
 Less: valuation allowance for capital loss carry-forwards  —  (505)
  Total deferred tax assets less valuation allowance 5,035  5,557
        
Deferred tax liabilities:     
 Premises and equipment 11   —
 Unrealized gain on securities 3,025  2,468
 Originated mortgage servicing rights 563  459
 Other 192  205
  Total deferred tax liabilities 3,791  3,132
        
  Net deferred tax asset$1,244  2,425

At December 31, 2012, the Company had no capital loss carry-forwards compared to approximately $0.5 million at December 31, 2011.

 

A valuation allowance is recognized for a deferred tax asset if, based on the weight of available evidence, it is more-likely-than-not that some portion of the entire deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

 

At December 31, 2012, the Company had no valuation for deferred tax assets compared to $0.5 million at December 31, 2011, which reduced its deferred tax asset related to capital loss carry-forwards. The capital loss carryforwards at December 31, 2011, were primarily attributable to a capital loss for income tax purposes related to its investments in the common stock of Silverton Financial Services, Inc, the holding company of Silverton Bank, which failed on May 1, 2009. In 2012, the Company sold its interests in three affordable housing limited partnerships. Because a large portion of the gain on sale of the limited partnership interests were characterized as capital gains for tax purposes, the Company reversed the previously established deferred tax valuation allowance of $0.5 million in 2012, which reduced the Company's annual income tax expense for the same period. Based upon the level of historical taxable income and projection for future taxable income over the periods which the temporary differences resulting in the remaining deferred tax assets are deductible, management believes it is more-likely-than-not that the Company will realize the benefits of its remaining deferred tax assets at December 31, 2012. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced.

 

The change in the net deferred tax asset for the years ended December 31, 2012, 2011, and 2010, is presented below.

     Year ended December 31
(Dollars in thousands)201220112010
Net deferred tax asset:        
Balance, beginning of year$2,425  5,813  3,683
Deferred tax (expense) benefit related to continuing operations (624)  368  777
Stockholders' equity, for accumulated other comprehensive (income) loss (557)  (3,756)  1,353
Balance, end of year$1,244  2,425  5,813

ASC 740 defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority. This section also provides guidance on the de-recognition, measurement, and classification of income tax uncertainties in interim periods. As of December 31, 2012, the Company had no unrecognized tax benefits related to federal or state income tax matters. The Company does not anticipate any material increase or decrease in unrecognized tax benefits during 2012 relative to any tax positions taken prior to December 31, 2012. As of December 31, 2012, the Company has accrued no interest and no penalties related to uncertain tax positions. It is the Company's policy to recognize interest and penalties related to income tax matters in income tax expense.

 

The Company and its subsidiaries file consolidated U.S. federal and State of Alabama income tax returns. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and the State of Alabama for the years ended December 31, 2009 through 2012.