INCOME TAXES

12 Months Ended

Dec. 31, 2011

Income Taxes

INCOME TAXES

7.	INCOME TAXES
	Total income taxes for the years ended December 31, 2011, 2010 and 2009 are as follows

	YEARS ENDED DECEMBER 31,
	2011		2010			2009
Income tax expense	$	1,347,949	$	1,384,431		$	760,117
Shareholders’ equity, for unrealized gains (losses) on securities available for sale		1,035,557		(311,158	)		(68,450	)
Total	$	2,383,506	$	1,073,273		$	691,667

Income tax expense attributable to income before income tax expense consists of:

YEAR ENDED DECEMBER 31,
2011	Current		Deferred			Total
U.S. Federal	$	1,292,984	$	(85,291	)	$	1,207,693
State and local		140,256		-			140,256
	$	1,433,240	$	(85,291	)	$	1,347,949

YEAR ENDED DECEMBER 31,
2010	Current		Deferred		Total
U.S. Federal	$	1,233,179	$	12,409	$	1,245,588
State and local		138,843		-		138,843
	$	1,372,022	$	12,409	$	1,384,431

YEAR ENDED DECEMBER 31,
2009
U.S. Federal	$	1,158,831	$	(483,397	)	$	675,434
State and local		84,683		-			84,683
	$	1,243,514	$	(483,397	)	$	760,117

Income tax expense attributable to income before income tax expense was $1,347,949, $1,384,431, and $760,117 for the years ended December 31, 2011, 2010 and 2009 respectively, and differed from amounts computed by applying the U.S. federal income tax rate of 34% to pretax income from continuing operations as a result of the following:

	YEARS ENDED
	DECEMBER 31,
	2011			2010			2009
Computed “expected” tax expense	$	1,542,671		$	1,532,200		$	898,013
Increase (reduction) in income taxes
Resulting from:
Tax exempt interest income		(317,802	)		(270,759	)		(212,594	)
State income tax, net of federal benefit		92,569			91,637			55,891
Other, net		30,511			31,353			18,807
	$	1,347,949		$	1,384,431		$	760,117

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2011 and 2010 are presented below:

	DECEMBER 31,
	2011			2010
Deferred tax assets:
State Net Operating Loss Carryforward	$	26,101		$	22,400
Allowance for loan losses		987,589			930,369
Other		38,550			23,637
Total gross deferred tax assets		1,052,240			976,406
Less valuation allowance		(26,101	)		(22,400	)
Net deferred tax assets		1,026,139			954,006
Deferred tax liabilities:
Prepaid expenses		(25,071	)		(23,067	)
Unrealized gain on securities available for sale		(1,182,650	)		(147,093	)
Deferred loan fees		(20,115	)		(5,884	)
Fixed assets, principally due to differences in depreciation		(65,137	)		(59,692	)
Other-Bond Accretion		(27,750	)		(62,589	)
Total gross deferred tax liabilities		(1,320,723	)		(298,325	)
Net deferred tax (liability) asset	$	(294,584	)	$	655,681

The Company analyzed the tax positions taken in its tax returns and concluded it has no liability related to uncertain tax positions.

There was a $26,101 valuation allowance for deferred tax assets at December 31, 2011 and $22,400 at December 31, 2010 associated with the Holding Company’s state net operating loss. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and prior to their expiration governed by the income tax code. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods during which the deferred income tax assets are expected to be deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences, net of the existing valuation allowance at December 31, 2011. The amount of the deferred income tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.

Tax returns for 2008 and subsequent years are subject to examination by taxing authorities.