Note 11: Income Taxes

12 Months Ended

Jun. 30, 2014

Notes

Note 11: Income Taxes

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 2010. The Company recognized no interest or penalties related to income taxes.

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

	June 30, 2014	June 30, 2013
Deferred tax assets:
Provision for losses on loans	$3,695,786	$3,545,918
Accrued compensation and benefits	450,135	211,117
Other-than-temporary impairment on available for sale securities	140,625	261,405
NOL carry forwards acquired	853,089	150,270
Minimum tax credit	129,864	-
Unrealized loss on other real estate	38,156	31,280
Unrealized loss on available for sale securities	-	116,157
Total deferred tax assets	5,307,655	4,316,147
Deferred tax liabilities:
FHLB stock dividends	156,635	188,612
Purchase accounting adjustments	1,532,622	1,228,067
Depreciation	766,677	761,389
Prepaid expenses	250,149	151,939
Unrealized gain on available for sale             securities	336,168	-
Other	164,096	40,224
Total deferred tax liabilities	3,206,347	2,370,231
Net deferred tax (liability) asset	$2,101,308	$1,945,916

As of June 30, 2014, the Company had approximately $2.3 million in federal and state net operating loss carryforwards which were acquired in the July 2009 acquisition of Southern Bank of Commerce and February 2014 acquisition of Citizens State Bankshares of Bald Knob, Inc. 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:

	For the twelve-month period ended
	June 30, 2014	June 30, 2013	June 30, 2012
Tax at statutory rate	$4,700,928	$4,767,373	$4,996,427
Increase (reduction) in taxes resulting from:
Nontaxable municipal income	(524,288)	(505,941)	(469,200)
State tax, net of Federal benefit	295,680	335,940	368,775
Cash surrender value of Bank-owned life insurance	(183,575)	(173,245)	(116,631)
Tax credit benefits	(390,810)	(341,755)	(236,451)
Tax benefits realized on acquisition	-	-	-
Acquisition costs	-	-	-
Other, net	(152,776)	(127,901)	54,189
Actual provision	$3,745,159	$3,954,471	$4,597,109

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