Note 12 - Federal and State Income Taxes

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 12.     Federal and State Income Taxes

Federal and state income tax expense was comprised of the following components for the years ended December 31, 2013, 2012, and 2011:

	2013			2012		2011
Current	$	5,639,933		$	2,232,183	$	195,135
Deferred		(1,021,991	)		2,302,418		3,673,064
	$	4,617,942		$	4,534,601	$	3,868,199

A reconciliation of the expected federal income tax expense to the income tax expense included in the consolidated statements of income was as follows for the years ended December 31, 2013, 2012, and 2011:

	Years Ended December 31,
	2013						2012						2011
	Amount			% of Pretax Income			Amount			% of Pretax Income			Amount			% of Pretax Income
Computed "expected" tax expense	$	6,844,665			35.0	%	$	6,174,295			35.0	%	$	4,899,324			35.0	%
Effect of graduated tax rates interest		(123,868	)		(0.6	)		(20,775	)		(0.1	)		(139,981	)		(1.0	)
Tax exempt income, net		(1,790,049	)		(9.2	)		(1,243,660	)		(7.0	)		(692,742	)		(4.9	)
Bank-owned life insurance		(624,847	)		(3.2	)		(544,292	)		(3.1	)		(490,491	)		(3.5	)
State income taxes, net of federal benefit, current year		758,695			3.9			730,865			4.1			533,250			3.8
Change in unrecognized tax benefits		37,180			0.2			(149,183	)		(0.8	)		2,074			-
Acquisition costs		248,952			1.3			-			-			-			-
Noncontrolling interests		-			-			(166,081	)		(0.9	)		(148,995	)		(1.1	)
Other		(732,786	)		(3.8	)		(246,568	)		(1.5	)		(94,240	)		(0.7	)
	$	4,617,942			23.6	%	$	4,534,601			25.7	%	$	3,868,199			27.6	%

Changes in the unrecognized tax benefits included in other liabilities are as follows for the years ended December 31, 2013 and 2012:

	2013			2012
Balance, beginning	$	994,078		$	1,148,549
Impact of tax positions taken during current year		288,016			202,341
Gross increase related to tax positions of prior years		16,939			21,781
Reduction as a result of a lapse of the applicable statute of limitations		(241,014	)		(378,593	)
Balance, ending	$	1,058,019		$	994,078

Included in the unrecognized tax benefits liability at December 31, 2013 are potential benefits of approximately $742,000 that, if recognized, would affect the effective tax rate.

The liability for unrecognized tax benefits includes accrued interest for tax positions, which either do not meet the more-likely-than-not recognition threshold or where the tax benefit is measured at an amount less than the tax benefit claimed or expected to be claimed on an income tax return. At December 31, 2013 and 2012, accrued interest on uncertain tax positions was approximately $316,000 and $302,000, respectively. Estimated interest related to the underpayment of income taxes is classified as a component of “income taxes” in the statements of income.

The Company’s federal income tax returns are open and subject to examination from the 2010 tax return year and forward. Various state franchise and income tax returns are generally open from the 2009 and later tax return years based on individual state statute of limitations.

The net deferred tax assets (liabilities) included with other assets on the consolidated balance sheets consisted of the following as of December 31, 2013 and 2012:

	2013		2012
Deferred tax assets:
Alternative minimum tax credits	$	3,936,226	$	2,717,333
New markets tax credits		1,500,000		1,000,000
Net unrealized losses on securities available for sale		8,468,118		-
Compensation		7,056,579		5,748,551
Loan/lease losses		6,890,532		6,041,379
Net operating loss carryforwards, federal and state		2,914,140		897,910
Deferred loan origination fees, net		143,949		299,670
Other		410,640		469,673
		31,320,184		17,174,516
Deferred tax liabilities:
Net unrealized gains on securities available for sale		-		2,905,784
Premises and equipment		1,575,582		1,601,682
Equipment financing leases		23,191,514		20,013,576
Acquisition fair value adjustments		1,319,981		-
Investment accretion		45,463		45,363
Other		551,080		367,440
		26,683,620		24,933,845
Net deferred tax asset (liability)	$	4,636,564	$	(7,759,329	)

At December 31, 2013, the Company had $6,949,939 of federal net operating loss carryforwards, of which $4,289,818 expires in 2029, $1,188,424 expires in 2030, $471,018 expires in 2031, $226,883 expires in 2032, and $773,797 expires in 2033. At December 31, 2013, the Company had $9,590,393 of state net operating loss carryforwards which are set to expire in varying amounts annually beginning in 2017 and ending in 2029.

The change in deferred income taxes was reflected in the consolidated financial statements as follows for the years ended December 31, 2013, 2012, and 2011:

	2013			2012			2011
Provision for income taxes	$	(1,021,991	)	$	2,302,418		$	3,673,064
Statement of stockholders' equity- accumulated other comprehensive income (loss), unrealized gains (losses) on securities available for sale, net		(11,373,902	)		(35,008	)		2,510,006
	$	(12,395,893	)	$	2,267,410		$	6,183,070