Income Taxes

12 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

8.INCOME TAXES

The provision for income taxes consists of (in thousands):

	2023		2022
Current:
Federal	$	4,183	$	4,915
State		59		207
Total current taxes		4,242		5,122
Deferred income tax expense		252		(188	)
Total income tax provision	$	4,494	$	4,934

The tax effects of deductible and taxable temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows (in thousands):

	2023		2022
Deferred tax assets:
Allowance for loan losses	$	3,890	$	3,891
Net unrealized loss on pension plan		—		294
Investment losses subject to Section 382 limitation		1,516		1,685
Net unrealized loss on securities		4,659		3,690
Deferred compensation		293		315
Other real estate owned		195		146
Nonaccrual interest		95		99
Employee stock ownership plan		596		544
Other		2,102		2,352
Total gross deferred tax assets		13,346		13,016
Deferred tax liabilities:
Pension plan		1,152		1,087
Mortgage servicing rights		184		166
Premises and equipment		264		281
Net unrealized gain on derivatives		2,118		3,215
Low income housing tax credits		1,164		1,081
Other		1,587		1,811
Total gross deferred tax liabilities		6,469		7,641
Net deferred tax assets	$	6,877	$	5,375

The Company establishes a valuation allowance for deferred tax assets when management believes that the deferred tax assets are not likely to be realized either through a carryback to taxable income in prior years, future reversals of existing taxable temporary differences, and, to a lesser extent, future taxable income.

Accounting principles prescribe a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in

the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met.

There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Consolidated Statement of Income. The Company’s federal and state income tax returns for taxable years through 2018 have been closed for purposes of examination by the Internal Revenue Service and the Pennsylvania Department of Revenue.

The reconciliation of the federal statutory rate and the Company’s effective income tax rate is as follows (dollars in thousands):

	2023						2022
	Amount			% of Pretax Income			Amount			% of Pretax Income
Provision at statutory rate	$	4,845			21.0	%	$	5,251			21.0	%
Income from bank-owned life insurance		(165	)		(0.7	)		(159	)		(0.6	)
Tax-exempt income		(317	)		(1.3	)		(292	)		(1.2	)
Low-income housing credits		(36	)		(0.1	)		(45	)		(0.2	)
Other, net		167			0.7			179			0.7
Actual tax expense and effective rate	$	4,494			19.5	%	$	4,934			19.7	%

The Bank is subject to the Pennsylvania Mutual Thrift Institutions Tax that is calculated at 11.5 percent of earnings based on U.S. generally accepted accounting principles with certain adjustments.