Income Taxes

12 Months Ended

Dec. 31, 2013

Note 9. Income Taxes

The components of income tax expense for the years ended December 31, 2013, 2012, and 2011 are as follows:


	2013			2012			2011
Current:
Federal	$	400,931		$	448,832		$	720,259
State		197,671			186,616			261,679

Total current		598,602			635,448			981,938
Deferred income taxes (benefits):
Federal		(9,542	)		(5,130	)		(156,652	)
State		44,795			43,489			(57,876	)

Total deferred taxes (benefits)		35,252			38,359			(214,528	)

Income tax expense	$	633,855		$	673,807		$	767,410

A reconciliation of income tax expense computed at the statutory rate of 34% to the actual income tax expense for the years ended December 31, 2013, 2012, and 2011 is as follows:


	2013			2012			2011

Income before income tax expense (benefit)	$	3,248,032		$	3,338,887		$	3,760,503

Taxes computed at Federal income tax rate	$	1,104,331		$	1,135,222		$	1,278,569
Increase (decrease) resulting from:
Tax-exempt income		(630,710	)		(644,546	)		(600,429	)
State income taxes, net of Federal income tax benefit		160,027			151,869			134,510
Other		207			31,262			(45,240	)

Income tax expense	$	633,855		$	673,807		$	767,410

The components of the net deferred income tax benefits as of December 31, 2013, 2012, and 2011 are as follows:


	2013		2012		2011

Deferred income tax benefits:
Accrued deferred compensation	$	129,101	$	120,695	$	108,861
Impairment loss on investment securities		1,218,497		1,212,351		1,212,351
Allowance for credit losses		458,303		816,722		1,275,889
Nonaccrual interest		339,765		283,045		69,103
Alternative minimum tax credits		485,444		306,523		136,952
Accumulated depreciation		60,627		75,650		62,144
Other real estate owned		14,940		-		-
Reserve for unfunded commitments		78,890		78,890		78,890
Other temporary differences		1,332		-		-
Accumulated securities premium accretion		39,514		-		-
Net unrealized depreciation on investment securities available for sale		778,048		-		-
Total deferred income tax benefits		3,604,461		2,893,876		2,944,190

Deferred income tax liabilities:
Accumulated securities discount accretion		-		32,209		44,165
Net unrealized appreciation on investment securities available for sale		-		1,626,412		1,219,126
Total deferred income tax liabilities		-		1,658,621		1,263,291

Net deferred income tax benefits	$	3,604,461	$	1,235,255	$	1,680,899

Management has determined that no valuation allowance is required as it believes it is more likely than not that all of the deferred tax assets will be fully realizable in the future. At December 31, 2013, 2012, and 2011, management believes there are no uncertain tax positions under ASC Topic 740 Income Taxes (formerly FIN 48, Accounting for Uncertainty in Income Taxes).

The Company’s federal income tax returns for 2012, 2011, and 2010 are subject to examinations by the IRS generally for three years after they were filed. In addition, the Company’s state tax returns for the same years are subject to examination by state tax authorities for similar time periods. The 2013 income tax return will be filed in 2014.

- 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.

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