INCOME TAXES

12 Months Ended

Dec. 31, 2011

INCOME TAXES

INCOME TAXES

7. INCOME TAXES

        The components of income tax expense consist of:

	2011			2010			2009
Current tax expense (benefit)	$	675,212		$	(227,637	)	$	(319,787	)
Deferred tax expense (benefit)		(1,757,769	)		(675,112	)		144,673
Total income tax expense (benefit)	$	(1,082,557	)	$	(902,749	)	$	(175,114	)

        Income tax expense for the years ended December 31, 2011, 2010, and 2009 differed from the amounts computed by applying the statutory federal income tax rate of 34% to earnings before income taxes as follows:

	2011			2010			2009
Income tax expense at statutory rate	$	(276,737	)	$	(93,008	)	$	289,493
Tax-exempt interest income—net of disallowed interest expense		(593,502	)		(600,841	)		(447,184	)
Nondeductible expenses		—			14,165			11,737
Cash surrender value of life insurance income		(125,420	)		(130,151	)		(130,866	)
Other—net		(86,898	)		(92,914	)		101,706
Income tax expense (benefit)	$	(1,082,557	)	$	(902,749	)	$	(175,114	)

        In 2011, the valuation allowance increased by $2,180.

        The tax effects of temporary differences that give rise to significant amounts of deferred tax assets and deferred tax liabilities are presented below:

	2011			2010
Deferred tax assets:
Net operating losses and credits	$	1,199,939		$	563,278
Net unrealized loss on securities available for sale		—			109,714
Loans, principally due to difference in allowance for loan losses and deferred loan fees		1,377,136			1,403,616
Nonaccrual loan interest		1,009,721			189,800
Postretirement benefit accrual, deferred compensation		1,032,690			1,017,693
Other real estate owned		734,217			563,904
Other		468,851			327,306
Gross deferred tax asset		5,822,554			4,175,311
Valuation allowance		(130,823	)		(128,643	)
Total deferred tax assets		5,691,731			4,046,668
Deferred tax liabilities:
Net unrealized gain on securities available for sale		1,351,989			—
Purchased loan discount		102,625			136,832
Premises and equipment		310,796			285,419
Other		213,764			207,926
Total deferred tax liabilities		1,979,174			630,177
Net deferred tax assets	$	3,712,557		$	3,416,491

        The Company has, at December 31, 2011, net operating loss carryforwards of approximately $1,222,574 for federal purposes and $3,303,617 for state income tax purposes, which begin to expire in the year 2016. The Company also has certain state income tax credits of $390,724 at December 31, 2011 which begins to expire in the year 2012. Due to the uncertainty relating to the realizability of all the carryforwards and credits, management currently considers it more likely than not that all related deferred tax assets will not be realized; thus, a $130,823 valuation allowance has been provided against state tax carry forwards totaling $3,307,617.

        Tax returns for 2008 and subsequent years are subject to examination by taxing authorities.

        The Company had analyzed the tax positions taken or expected to be taken in its tax returns and concluded it has no liability related to uncertain tax positions.