12. Income Taxes

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

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:

	2015			2014
Currently paid or payable	$	1,937,004		$	1,030,257
Deferred tax (benefit) expense		(172,374	)		755,139
Total income tax expense	$	1,764,630		$	1,785,396

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:

	2015			2014
Computed expense at statutory rates	$	2,048,461		$	2,148,522
Tax exempt interest & BOLI		(414,855	)		(404,382	)
Disallowed interest		11,523			13,306
Partnership tax credits		(566,949	)		(647,760	)
Low income housing investment amortization expense		403,445			443,832
NMTC amortization expense		161,890			147,290
Other		121,115			84,588
	$	1,764,630		$	1,785,396

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

	2015			2014
Depreciation	$	(82,902	)	$	(5,039	)
Mortgage servicing rights		(6,421	)		(5,819	)
Deferred compensation		(26,169	)		45,324
Bad debts		(36,042	)		(17,326	)
Non-accrual loan interest		13,731			18,766
Limited partnership amortization		56,890			44,566
Investment in CFSG Partners		20,182			(7,189	)
Core deposit intangible		(92,716	)		(92,719	)
Loan fair value		(9,951	)		(7,953	)
OREO write down		(10,370	)		5,100
Tax credit carryovers		0			774,961
Other		1,394			2,467
Deferred tax (benefit) expense	$	(172,374	)	$	755,139

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

	2015		2014
Components of the deferred tax asset:
Bad debts	$	1,704,039	$	1,667,997
Non-accrual loan interest		0		13,731
Deferred compensation		243,972		217,803
Limited partnerships		0		12,646
Contingent liability - MPF program		45,042		45,042
OREO write down		20,400		10,030
Capital lease		69,567		73,141
Unrealized loss on securities available-for-sale		23,385		3,834
Other		28,733		26,553
Total deferred tax asset		2,135,138		2,070,777
Components of the deferred tax liability:
Depreciation		154,546		237,448
Limited partnerships		44,244		0
Mortgage servicing rights		439,647		446,068
Investment in CFSG Partners		101,848		81,666
Core deposit intangible		185,431		278,147
Fair value adjustment on acquired loans		29,444		39,395
Total deferred tax liability		955,160		1,082,724
Net deferred tax asset	$	1,179,978	$	988,053

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, 2012 through 2014.