INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2013

For the years ended December 31, 2013, 2012 and 2011, income tax expense attributable to income from operations consisted of the following:

Current:	2013			2012		2011
State	$	394,645		$	529,603	$	24,739
Federal		3,548,242			4,207,980		1,592,276
		3,942,887			4,737,583		1,617,015
Deferred expense/(benefit)		(120,590	)		646,899		3,416,135
	$	3,822,297		$	5,384,482	$	5,033,150

Effective income tax expense

Income tax expense differed from the amounts computed by applying the U.S. Federal statutory income tax rate to income before income tax expense as follows:

	2013			2012			2011
Tax computed at statutory rate	$	4,268,140		$	5,578,285		$	5,294,107
Tax-exempt interest		(483,029	)		(506,280	)		(543,638	)
Dividend exclusion		(46,330	)		(39,237	)		(35,439	)
State taxes, net of Federal impact		188,182			438,582			386,214
Nondeductible interest expense		10,860			16,119			23,242
Other items, net		(115,526	)		(102,987	)		(91,336	)
Income tax expense	$	3,822,297		$	5,384,482		$	5,033,150

Deferred tax assets and deferred tax liabilities

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2013 and 2012, are presented below:

	2013		2012
Deferred tax assets:
Allowance for loan losses	$	4,889,110	$	3,989,953
Accrual for employee benefit plans		753,917		780,282
Depreciation		431,029		698,373
Deferred compensation and directors' fees		947,406		924,582
Purchase accounting adjustment – deposits		136,975		141,784
Purchase accounting adjustment – loans		339,440		612,696
Purchase accounting adjustment - fixed assets		223,744		223,602
Accounting for defined benefit pension and other benefit plans		3,690,995		6,776,728
Trust preferred impairment write down		741,926		1,340,893
Other		510,429		723,419
Total gross deferred tax assets	$	12,664,971	$	16,212,312

Deferred tax liabilities:	2013		2012
Deferred loan fees and costs	$	929,357	$	908,343
Prepaid pension		5,435,293		6,102,441
Net unrealized gains on securities available for sale		3,929,141		5,165,238
Other		1,288,557		1,100,783
Total gross deferred tax liabilities		11,582,348		13,276,805
Net deferred tax asset	$	1,082,623	$	2,935,507

Reconciliation of unrecognized tax benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest) is as follows:

	2011
Balance at January 1	$	123,530
Additions for tax positions of current year		-
Reductions related to settlement with taxing authorities		(123,530	)
Balance at December 31	$	-