INCOME TAXES

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

NOTE 11 - INCOME TAXES

Allocation of federal and state income taxes between current and deferred portions is as follows:

	2012			2011
Current
Federal	$	2,827,187		$	1,663,022
State		678,278			557,499
		3,505,465			2,220,521
Deferred
Federal		(631,256	)		(611,296	)
State		(97,984	)		(75,650	)
		(729,240	)		(686,946	)
Total income tax expense	$	2,776,225		$	1,533,575

The reasons for the differences between the statutory federal income tax rate and the effective tax rates are summarized as follows:

	2012						2011
	Amount			Percent of Pre-Tax Income			Amount			Percent of Pre-Tax Income
Expected income tax expense at federal tax rate	$	2,640,487			34.00	%	$	1,596,313			34.00	%
State taxes net of federal benefit		177,559			2.29	%		127,658			2.72	%
Nondeductible expenses		28,890			0.37	%		21,246			0.45	%
Nontaxable income		(320,054	)		(4.12	%)		(347,329	)		(7.40	%)
Other		249,343			3.21	%		135,687			2.89	%
Total income tax expense	$	2,776,225			35.75	%	$	1,533,575			32.66	%

The net deferred tax assets in the accompanying balance sheets include the following components:

	2012		2011
Deferred tax assets
Deferred fees	$	-	$	1,410
Allowance for loan losses		3,253,425		3,019,914
Deferred compensation		1,860,068		1,739,075
OREO valuation allowance and expenses		1,510,974		1,245,000
Other		438,077		163,612
		7,062,544		6,169,011
Deferred tax liabilities
Unrealized gain on investment securities		71,701		149,188
FHLB stock dividends		156,182		156,182
Depreciation		29,386		31,169
		257,269		336,539
Net deferred tax assets	$	6,805,275	$	5,832,472

Retained earnings at December 31, 2012 included approximately $1.2 million of bad debt deductions allowed for federal income tax purposes (the “base year tax reserve”) for which no deferred income tax has been recognized. If, in the future, this portion of retained earnings is used for any purpose other than to absorb bad debt losses, it would create income for tax purposes only and income taxes would be imposed at the then prevailing rates. The unrecorded income tax liability on the above amount was approximately $463,000 at December 31, 2012.

The Company does not have uncertain tax positions that are deemed material and did not recognize any adjustments for unrecognized tax benefits. The Company’s policy is to recognize interest and penalties on income taxes as a component of tax expense. The Company is no longer subject to U.S. Federal tax examinations by tax authorities for years before 2009.