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Income Taxes
 12 Months Ended
Sep. 30, 2021
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
Income tax expense for the years ended September 30, 2021, 2020, and 2019 consisted of the following:
202120202019
(Dollars in thousands)
Current:
Federal$17,586 $17,610 $22,030 
State4,028 4,068 4,742 
21,614 21,678 26,772 
Deferred:
Federal(1,405)(4,857)(456)
State(263)(731)95 
(1,668)(5,588)(361)
$19,946 $16,090 $26,411 
The Company's effective tax rates were 20.8%, 20.0%, and 21.9% for the years ended September 30, 2021, 2020, and 2019, respectively. The differences between such effective rates and the statutory Federal income tax rate computed on income before income tax expense resulted from the following:
202120202019
Amount%Amount%Amount%
(Dollars in thousands)
Federal income tax expense
computed at statutory Federal rate$20,166 21.0 %$16,932 21.0 %$25,337 21.0 %
Increases (decreases) in taxes resulting from:
State taxes, net of Federal tax effect3,102 3.2 2,626 3.3 4,024 3.3 
Low income housing tax credits, net(2,085)(2.1)(1,897)(2.4)(1,745)(1.4)
ESOP related expenses, net (662)(0.7)(525)(0.6)(757)(0.6)
Acquired BOLI policies— — (636)(0.8)— — 
Other(575)(0.6)(410)(0.5)(448)(0.4)
$19,946 20.8 %$16,090 20.0 %$26,411 21.9 %

The components of the net deferred income tax liabilities as of September 30, 2021 and 2020 were as follows:
20212020
(Dollars in thousands)
Deferred income tax assets:
Unrealized loss on interest rate swaps$6,763 $12,916 
ACL4,163 6,553 
Lease liabilities3,129 3,590 
Salaries, deferred compensation and employee benefits2,017 1,622 
ESOP compensation1,422 1,360 
Reserve for off-balance sheet credit exposures1,402 — 
Low income housing partnerships522 655 
Net purchase discounts related to acquired loans287 577 
Other417 2,717 
Gross deferred income tax assets20,122 29,990 
Valuation allowance(72)(1,808)
Gross deferred income tax asset, net of valuation allowance20,050 28,182 
Deferred income tax liabilities:
FHLB stock dividends12,563 15,699 
Premises and equipment4,256 4,625 
Lease right-of-use assets3,088 3,588 
ACL2,892 2,388 
Unrealized gain on AFS securities1,501 7,617 
Deposit intangible1,047 1,475 
Other513 970 
Gross deferred income tax liabilities25,860 36,362 
Net deferred tax liabilities$5,810 $8,180 
The State of Kansas allows for a bad debt deduction on savings and loan institutions' privilege tax returns of up to 5% of Kansas taxable income.  Due to the low level of net loan charge-offs experienced by the Bank historically, at times, the Bank's bad debt deduction on the Kansas privilege tax return has been in excess of actual net charge-offs, resulting in a state deferred tax liability, which is presented separately from the federal deferred tax asset related to ACL.

The Company assesses the available positive and negative evidence surrounding the recoverability of its deferred tax assets and applies its judgment in estimating the amount of valuation allowance necessary under the circumstances.  At September 30, 2021 and 2020, the Company had a valuation allowance of $72 thousand and $1.8 million, respectively, related to the net operating losses generated by the Company's consolidated Kansas corporate income tax return. The companies included in the consolidated Kansas corporate income tax return are the holding company, Capitol Funds, Inc. and Capital City Investments, Inc., as the Bank files a Kansas privilege tax return. Based on the nature of the operations of the holding company, Capitol Funds, Inc. and Capital City Investments, Inc., management believes there will not be sufficient taxable income to fully utilize the deferred tax assets noted above; therefore, a valuation allowance has been recorded for the related amounts at September 30, 2021 and 2020. The decrease in the valuation allowance at September 30, 2021 compared to September 30, 2020 was due primarily to the expiration of operating losses generated during fiscal year 2011, which resulted in the removal of the related deferred tax asset and corresponding valuation allowance.

ASC 740 Income Taxes prescribes a process by which a tax position taken, or expected to be taken, on an income tax return is determined based upon the technical merits of the position, along with whether the tax position meets a more-likely-than-not-recognition threshold, to determine the amount, if any, of unrecognized tax benefits to recognize in the financial statements. Estimated penalties and interest related to unrecognized tax benefits are included in income tax expense in the consolidated statements of income. For the years ended September 30, 2021, 2020, and 2019 the Company had no unrecognized tax benefits.
The Company files income tax returns in the U.S. federal jurisdiction and the state of Kansas, as well as other states where it has either established nexus under an economic nexus theory or has exceeded enumerated nexus thresholds based on the amount of interest income derived from sources within a given state. With few exceptions, the Company is no longer subject to U.S. federal and state examinations by tax authorities for fiscal years ending before 2018.