NOTE 16 – INCOME TAXES

The Company and its subsidiary are subject to U.S. federal and state income tax. The components of income tax expense for the years ended December 31, 2013 and 2012 are as follows:



(Dollars in thousands)	2013		2012

Current:
Federal	$	(1,117)	$	(22)
State		115		22
		(1,002)		-
Deferred:
Federal		1,000		(375)
State		135		46
		1,135		(329)
	$	133	$	(329)

The reconciliation of the statutory federal income tax at a rate of 34% to the income tax expense (benefit) included in the statements of income and comprehensive income for the years ended December 31, 2013 and 2012 is as follows:



(Dollars in thousands)	2013				2012

Federal income tax at statutory rate	$	531	34	%	$	138	34	%
Tax exempt interest		(357)	(23)			(398)	(98)
State income tax, net of federal income tax effect		76	5			45	11
Bank owned life insurance		(120)	(8)			(134)	(33)
Other		3	0			20	5
	$	133	8	%	$	(329)	(81)	%

The components of the net deferred tax asset at December 31, 2013 and 2012 are as follows:



(Dollars in thousands)	2013		2012

Deferred tax assets:
Allowance for loan losses	$	2,165	$	1,987
Deferred compensation		594		584
Foreclosed real estate		299		565
AMT credit		-		532
Intangible assets		28		34
Restricted stock		143		142
Other-than-temporary impairment		118		96
Unrealized loss on securities available for sale		1,434		-
Other		266		254
Total deferred tax assets		5,047		4,194
Deferred tax liabilities:
Depreciation		(804)		(260)
Prepaid expenses		(161)		(151)
Unrealized gain on securities, available for sale		-		(237)
Total deferred tax liabilities		(965)		(648)
Net deferred tax asset	$	4,082	$	3,546