Income Tax

12 Months Ended

Dec. 31, 2013

Note 12: Income Tax

	2013			2012
Income tax expense
Currently payable
Federal	$	1,286		$	480
State		204			(32	)
Deferred
Federal		(40	)		312
State		8			99
Total income tax expense	$	1,458		$	859
Reconciliation of federal statutory to actual tax expense
Federal statutory income tax at 34%	$	2,005		$	1,656
Effect of state income taxes		140			45
Tax exempt interest		(525	)		(367	)
Bargain purchase gain		-			(336	)
Cash value of life insurance		(110	)		(104	)
Other		(52	)		(35	)
Actual tax expense	$	1,458		$	859
Effective tax rate		24.7	%		17.6	%

The cumulative net deferred tax asset is included in the balance sheets in other assets. The components of the asset are as follows:

	2013			2012
Assets
Allowance for loan losses	$	1,719		$	1,358
Available-for-sale securities		1,019			-
Deferred compensation		545			455
Purchase accounting adjustments		599			834
Nonaccrual interest		109			111
Real estate held for sale		69			237
AMT		-			89
Other		52			72
Total assets		4,112			3,156
Liabilities
Depreciation and amortization		(585	)		(572	)
Loan fees		(184	)		(184	)
Mortgage servicing rights		(247	)		(259	)
Federal Home Loan Bank stock dividends		(90	)		(92	)
Prepaid expenses		(228	)		(220	)
Available-for-sale securities		-			(1,053	)
Pension and employee benefits		-			(64	)
Intangibles		(153	)		(192	)
Other		(103	)		(102	)
Total liabilities		(1,590	)		(2,738	)
	$	2,522		$	418

Retained earnings include approximately $2,100,000 for which no deferred income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions as of December 31, 1987 for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which income would be subject to the then-current corporate income tax rate. The unrecorded deferred income tax liability on the above amount was approximately $714,000.

- 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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