INCOME TAXES

12 Months Ended

Dec. 31, 2011

INCOME TAXES [Abstract]

INCOME TAXES

NOTE K. INCOME TAXES

The provision/(benefit) for income taxes included in the consolidated statements of income is as follows for the years ended December 31, 2011 and 2010:

	2011			2010
Current	$	608,362		$	(252,103	)
Deferred		(1,087,103	)		485,249
	$	(478,741	)	$	233,146

The provision/(benefit) for federal income taxes differs from that computed by applying the federal statutory rate of 34% in 2011 and 2010 as indicated in the following analysis:

	2011			2010
Tax Based on Statutory Rate	$	(28,650	)	$	729,603
State Taxes		14,790			(32,255	)
Effect of Tax-Exempt Income		(452,240	)		(573,870	)
Other		(12,641	)		109,668
	$	(478,741	)	$	233,146

The net deferred tax liability of $4,650 in 2011 and $1,329,565 in 2010 is included in accrued taxes and other liabilities.  The net deferred tax liability consists of the following components at December 31, 2011 and 2010:

	2011			2010
Deferred Tax Liabilities:
Unrealized gain on available-for-sale securities	$	(902,612	)	$	(1,140,423	)
Depreciation		(832,193	)		(849,097	)
Federal Home Loan Bank dividends		(13,706	)		(20,252	)
Other		(22,901	)		-
		(1,771,412	)		(2,009,772	)
Deferred Tax Assets:
Provision for loan losses		1,130,863			482,785
Deferred Compensation		154,210			145,670
Other real estate		78,207			-
Other		403,482			51,752
		1,766,762			680,207
Net Deferred Tax Liability	$	(4,650	)	$	(1,329,565	)

A summary of the changes in the net deferred tax asset (liability) for the years ended December 31, 2011 and 2010 is as follows:

	2011			2010
Balance at beginning of year	$	(1,329,565	)	$	(1,052,725	)
Deferred tax expense, charged to operations		1,087,103			(485,249	)
Other comprehensive income, charged to equity		237,812			208,409
Balance at end of year	$	(4,650	)	$	(1,329,565	)