Note 11: Income Taxes

12 Months Ended

Jun. 30, 2013

NOTE 11: Income Taxes

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

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

	June 30, 2013	June 30, 2012
Deferred tax assets:
Provision for losses on loans	$3,545,918	$3,247,995
Accrued compensation and benefits	211,117	171,113
Other-than-temporary impairment on available for sale securities	261,405	261,405
NOL carry forwards acquired	150,207	159,613
Unrealized loss on other real estate	31,280	47,600
Unrealized loss on available for sale securities	116,157	-
Total deferred tax assets	4,316,147	3,887,726

Deferred tax liabilities:
FHLB stock dividends	188,612	188,612
Purchase accounting adjustments	1,228,067	893,549
Depreciation	761,389	552,633
Prepaid expenses	151,939	123,704
Unrealized gain on available for sale securities	-	400,554
Other	40,224	69,083
Total deferred tax liabilities	2,370,231	2,228,135

Net deferred tax asset	$1,945,916	$1,659,591

As of June 30, 2013, the Company had approximately $440,000 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 the 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 expense is shown below:

	Year ended June 30,
	2013	2012	2011
Tax at statutory rate	$4,767,373	$4,996,427	$5,923,356
Increase (reduction) in taxes resulting from:
Nontaxable municipal income	(505,941)	(469,200)	(384,457)
State tax, net of Federal benefit	335,940	368,775	460,690
Cash surrender value of Bank-owned life insurance	(173,245)	(116,631)	(94,364)
Tax credit benefits	(341,755)	(236,451)	(119,901)
Other, net	(127,901)	54,189	166,279
ACTUAL PROVISION	$3,954,471	$4,597,109	$5,951,603

Tax credit benefits are recognized under the flow-through method of accounting for investments in tax credits.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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