Income Taxes

12 Months Ended

Dec. 31, 2012

Notes

Income Taxes

9. INCOME TAXES

At December 31, 2012, the Bank has net operating loss carry forwards of approximately $8,440,000 for income tax purposes that expire in 2013 through 2027.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes.  For financial reporting purposes, a valuation allowance of $3,442,769 and $3,035,058 as of December 31, 2012 and 2011, respectively, has been recognized to offset the net deferred tax assets related to the cumulative temporary differences and the tax loss carry forwards.  Significant components of the Bank’s net deferred tax assets are as follows:

	December 31, 2012	December 31, 2011
Deferred tax assets(liabilities):
Provision for loan losses	$333,853	$212,652
Unrealized gain on investment securities	(17,334)	(19,710)
Depreciation	94,393	369,764
Net operating loss carryforwards	2,897,243	2,313,074
Other, net	134,614	159,278
Valuation allowance for deferred tax assets	(3,442,769)	(3,035,058)
Net deferred tax assets	-	-

	2012	2011
Effective rate reconciliation:
Tax at statutory rate (34%)	$(345,524)	$(350,622)
Nondeductible expenses	6,507	6,278
Increase in valuation allowance	407,711	285,290
Other	(68,694)	59,054
Total tax expense	-	-

Management has evaluated the Bank’s tax positions and concluded that the Bank has taken no uncertain tax positions that require adjustment to the financial statements. With few exceptions, the Bank is no longer subject to income tax examinations by the U.S. federal, state or local tax authorities for the years before 2009.