Income Tax

12 Months Ended

Dec. 31, 2012

Income Tax

Note 14: Income Tax

The provision for income taxes includes these components:

	2012			2011			2010
Income tax expense
Currently payable
Federal	$	1,745		$	423		$	707
State		305			(6	)		540
Deferred
Federal		887			(94	)		969
State		(305	)		6			(540	)
Total income tax expense	$	2,632		$	329		$	1,676

A reconciliation of income tax expense at the federal statutory rate to actual tax expense is shown below:

	2012			2011			2010
Federal statutory income tax at 34%	$	3,359		$	1,297		$	2,797
Low income housing credits		(283	)		(445	)		(592	)
Tax-exempt income		(587	)		(615	)		(723	)
Other		143			92			194
Actual tax expense	$	2,632		$	329		$	1,676
Effective tax rate		26.64	%		8.63	%		20.37	%

The components of the deferred asset included on the consolidated balance sheets were as follows:

	2012			2011
Assets
Allowance for loan losses	$	6,816		$	7,245
Deferred compensation		3,170			3,090
Business tax and AMT credit carryovers		7,593			7,841
Capital loss carryover		557			832
Net operating loss carryover		2,822			2,582
Goodwill impairment		3,598			4,012
Other		2,063			2,150
Total assets		26,619			27,752
Liabilities
Unrealized gain on securities available for sale		(1,600	)		(886	)
Depreciation and amortization		(1,197	)		(1,554	)
FHLB stock		(566	)		(564	)
State income tax		(1,547	)		(1,351	)
Loan fees		(672	)		(511	)
Investments in limited partnerships		(2,301	)		(2,258	)
Mortgage servicing rights		(650	)		(1,073	)
Other		(338	)		(334	)
Total liabilities		(8,871	)		(8,531	)
Valuation Allowance
Beginning balance		(1,835	)		(1,335	)
Increase during period		—			(500	)
Ending balance		(1,835	)		(1,835	)
Net deferred tax asset	$	15,913		$	17,386

The Company has unused business income tax credits of $6,242,000 that will begin to expire in 2024 and a state net operating loss of $2,822,000 that will begin to expire in 2022. In addition, the Company has an AMT credit carryover of $1,351,000 with an unlimited carryover period.

Retained earnings include approximately $14,743,000 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 amounts was approximately $5,013,000.

The Company’s federal and state income tax returns have been closed without audit by the IRS through the year ended December 31, 2008.