INCOME TAXES

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

10. Income Taxes

Total income taxes for the years ended December 31, 2016, 2015 and 2014 are as follows:

	For the Year Ended December 31,
	2016			2015			2014
Income tax expense	$	1,688,433		$	2,287,248		$	1,997,866
Unrealized gains (losses) on securities available for sale presented in accumulated other comprehensive income (loss)		(939,482	)		(147,104	)		168,627
Total	$	748,951		$	2,140,144		$	2,166,493

Income tax expense was as follows:

	For the Year Ended December 31,
	2016			2015			2014
Current income taxes
Federal	$	2,438,687		$	2,102,154		$	1,703,444
State		—			224,083			200,361
Total current tax expense		2,438,687			2,326,237			1,903,805
Deferred income tax (benefit) expense		(750,254	)		(38,989	)		94,061
Income tax expense	$	1,688,433		$	2,287,248		$	1,997,866

The differences between actual income tax expense and the amounts computed by applying the U.S. federal income tax rate of 34% to pretax income from continuing operations for the periods indicated are reconciled as follows:

	For the Year Ended December 31,
	2016			2015			2014
Computed “expected” tax expense	$	2,358,069		$	2,438,322		$	2,174,873
Increase (reduction) in income taxes resulting from:
State income tax, net of federal benefit		(156,114	)		147,895			132,238
Tax exempt interest income		(339,994	)		(341,970	)		(357,834	)
Other, net		(173,528	)		43,001			48,589
	$	1,688,433		$	2,287,248		$	1,997,866

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2016 and 2015 are presented below:

	December 31
	2016			2015
Deferred tax assets:
Allowance for loan losses	$	1,248,551		$	1,064,916
State net operating loss carryforward		50,301			45,987
State credit carryforward		236,536			—
Unrealized loss on securities available for sale		356,562			—
Other		45,661			23,749
Total gross deferred tax assets		1,937,611			1,134,652
Valuation allowance		(50,301	)		(45,987	)
Deferred tax liabilities:
Prepaid expenses		(2,779	)		(1,363	)
Unrealized gain on securities available for sale		—			(582,926	)
Deferred loan fees		(46,392	)		(40,184	)
Fixed assets, principally due to differences in depreciation		(52,236	)		(24,611	)
Other bond accretion		(78,877	)		(65,735	)
Total gross deferred tax liabilities		(180,284	)		(714,819	)
Net deferred tax assets	$	1,707,026		$	373,846

In 2016, the Company invested in a South Carolina Rehabilitation Credit. The tax credit is included in deferred tax assets and is being amortized. Amortization expense recognized for the year ended December 31, 2016 was $325,000 and was included in other operating expense on the statement of operations.

There was a $50,301 valuation allowance for deferred tax assets at December 31, 2016 and $45,987 at December 31, 2015 associated with the 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, 2016. 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.

The Company has analyzed the tax positions taken or expected to be taken in its tax returns and concluded it has no liability related to uncertain tax positions in accordance with applicable regulations.

Tax returns for 2013 and subsequent years are subject to examination by taxing authorities.