Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

Note 12.  Income Taxes

The Company prepares its federal income tax return on a consolidated basis.  Federal income taxes are allocated to members of the consolidated group based on taxable income.

Federal income tax expense for the years ended December 31 was as follows:

	2011			2010
Currently paid or payable	$	348,610		$	1,011,997
Deferred		(114,334	)		(456,275	)
Total income tax expense	$	234,276		$	555,722

Total income tax expense differed from the amounts computed at the statutory federal income tax rate of 34 percent primarily due to the following for the years ended December 31:

	2011			2010
Computed expected tax expense	$	1,298,059		$	1,530,588
Tax exempt interest		(382,943	)		(477,502	)
Disallowed interest		20,786			34,891
Partnership tax credits		(704,826	)		(534,808	)
Other		3,200			2,553
Total income tax expense	$	234,276		$	555,722

The deferred income tax benefit consisted of the following items for the years ended December 31:

	2011			2010
Depreciation	$	(46,560	)	$	11,660
Mortgage servicing rights		7,050			48,874
Deferred compensation		115,239			(27,343	)
Bad debts		(53,913	)		(94,313	)
Non-accrual loan interest		(19,867	)		(40,129	)
Core deposit intangible		(144,869	)		(181,087	)
Loan fair value		(29,648	)		(23,674	)
Time deposit fair value		0			(61,880	)
Fannie Mae preferred stock write down		16,919			(9,532	)
OREO write down		53,210			(53,210	)
Other		(11,895	)		(25,641	)
Total deferred income tax benefit	$	(114,334	)	$	(456,275	)

Listed below are the significant components of the net deferred tax asset at December 31:

	2011		2010
Components of the deferred tax asset:
Bad debts	$	1,147,235	$	1,093,322
Non-accrual loan interest		99,972		80,105
Deferred compensation		222,210		337,449
Contingent liability - MPF program		42,139		38,307
Fair value adjustment on acquired securities
available-for-sale		528,205		545,125
Fannie Mae preferred stock write down		251,373		251,373
OREO write down		0		53,210
Capital lease		66,995		60,101
Alternative minimum tax		59,031		59,031
Fair value adjustment on acquired premises
and equipment		153,862		153,862
Other		112,310		111,141
Total deferred tax asset		2,683,332		2,783,026
Components of the deferred tax liability:
Depreciation		298,260		344,820
Limited partnerships		255,280		255,280
Mortgage servicing rights		373,130		366,080
Unrealized gain on securities available-for-sale		68,892		39,491
Core deposit intangible		579,478		724,347
Fair value adjustment on acquired loans		72,544		102,192
Total deferred tax liability		1,647,584		1,832,210
Net deferred tax asset	$	1,035,748	$	950,816

US GAAP provides for the recognition and measurement of deductible temporary differences (including general valuation allowances) to the extent that it is more likely than not that the deferred tax asset will be realized.

The net deferred tax asset is included in other assets in the consolidated balance sheets.

ASC Topic 740, "Income Taxes", defines the criteria that an individual tax position must satisfy for some or all of the benefits of that position to be recognized in a company's financial statements. Topic 740 prescribes a recognition threshold of more-likely-than-not, and a measurement attribute for all tax positions taken or expected to be taken on a tax return, in order for those tax positions to be recognized in the consolidated financial statements. The Company has adopted these provisions and there was no material effect on the consolidated financial statements.  The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2008 through 2010.