Note 8: Income Taxes

3 Months Ended

Sep. 30, 2012

Notes

Note 8: Income Taxes

Note 8: Income Taxes

The Company files income tax returns in the U.S. Federal jurisdiction and various states.  The Company is no longer subject to federal and state examinations by tax authorities for fiscal years before 2009.  The Company recognized no interest or penalties related to income taxes.

The Company’s income tax provision is comprised of the following components:

	For the three-month period ended
	September 30, 2012	September 30, 2011
Income taxes
Current	$1,140,886	$1,444,207
Deferred	-	-
Total income tax provision	$1,140,886	$1,444,207

The components of net deferred tax assets (liabilities) are summarized as follows:

	September 30, 2012	June 30, 2012
Deferred tax assets:
Provision for losses on loans	$3,448,182	$3,247,995
Accrued compensation and benefits	173,696	171,113
Other-than-temporary impairment on available for sale securities	261,405	261,405
NOL carry forwards acquired	159,613	159,613
Unrealized loss on other real estate	37,400	47,600
Total deferred tax assets	4,080,296	3,887,726
Deferred tax liabilities:
FHLB stock dividends	188,612	188,612
Purchase accounting adjustments	893,549	893,549
Depreciation	531,644	552,633
Prepaid expenses	106,759	123,704
Unrealized gain on available for sale securities	529,050	400,554
Other	299,588	69,083
Total deferred tax liabilities	2,549,201	2,228,135
Net deferred tax asset	$1,531,095	$1,659,591

As of September 30, 2012, and June 30, 2012, the Company had approximately $515,000 of federal and state net operating loss carryforwards, which were acquired in the July 2009 acquisition of Southern Bank of Commerce.  The amount reported is net of the IRC Sec. 382 limitation, or state equivalent, related to utilization of net operating loss carryforwards of acquired corporations.  Unless otherwise utilized, the net operating losses will begin to expire in 2027. 

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax is shown below:

	For the three-month period ended
	September 30, 2012	September 30, 2011
Tax at statutory rate	$1,268,588	$1,460,164
Increase (reduction) in taxes resulting from:
Nontaxable municipal income	(124,268)	(104,370)
State tax, net of Federal benefit	92,400	116,655
Cash surrender value of Bank-owned life insurance	(42,779)	(24,328)
Other, net	(53,055)	(3,914)
Actual provision	$1,140,886	$1,444,207

Tax credit benefits in the amount of $125,000 were recognized in the three-month period ended September 30, 2012, as compared to $73,000 recognized in the three-month period ended September 30, 2011, under the flow-through method of accounting for investments in tax credits.