INCOME TAXES

12 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

8. Income Taxes

Allocation of federal and state income taxes between current and deferred portions is as follows:

	For the Year Ended June 30,
(In thousands)	2024			2023
Current tax provision:
Federal	$	4		$	268
State		37			31
		41			299
Deferred tax expense (benefit):
Federal		(134	)		(62	)
State		87			-
Valuation allowance		(33	)		64
		(80	)		2
Total income tax provision (benefit)	$	(39	)	$	301

The reasons for the differences between the statutory federal income tax rate and the effective tax rates are summarized as follows:

	Years Ended June 30,
(Dollars in thousands)	2024			2023
Statutory amount	$	(1	)	$	367
Increase (decrease) resulting from:
State taxes, net of federal tax expense (benefit)		16			22
Tax exempt interest		(42	)		(85	)
Bank-owned life insurance		(73	)		(31	)
Stock-based compensation		21			7
Other, net		(47	)		(43	)
Valuation allowance		87			64
Effective (benefit) tax	$	(39	)	$	301
Effective tax rate		(650.0	%)		17.2	%

The components of the net deferred tax asset are as follows:

	As of June 30,
(In thousands)	2024			2023
Deferred tax assets:
Allowance for credit losses	$	463		$	466
Employee benefit plans		469			360
ESOP		32			23
Stock-based compensation		38			22
Accrued rent		5			1
Net unrealized loss on available for sale securities		-			2
Depreciation and amortization		-			10
Federal net operating loss carryforward		104			-
Charitable Foundation contribution carryforward		374			374
		1,485			1,258
Valuation allowance		(266	)		(179	)
Gross deferred tax assets		1,219			1,079
Deferred tax liabilities:
Depreciation and amortization	$	26		$	-
		26			-
Net deferred tax asset	$	1,245		$	1,079

A summary of the change in the net deferred tax asset is as follows:

	Years Ended June 30,
(In thousands)	2024			2023
Balance at beginning of fiscal year	$	1,079		$	1,079
Deferred tax (expense) benefit		80			(2	)
Adoption of ASU 2016-13 (CECL)		88			-
Deferred tax effects of net unrealized gain on available for sale securities		(2	)		2
Balance at end of fiscal year	$	1,245		$	1,079

The calculation of the Company's charitable contribution carryforward deferred tax asset is based upon a carryforward of approximately $1,272,000 of charitable contributions at June 30, 2024. As of June 30, 2024, it has been determined that it is more likely than not that a portion of the benefit from this charitable contribution carryforward will not be realized prior to expiration. As a result, a valuation allowance of $266,000 has been provided on this deferred tax asset for the year ended June 30, 2024. As of June 30, 2023, the valuation allowance related to the benefit from the charitable foundation contribution carryforward was $179,000. The increases of $87,000 in the year ended June 30, 2024 and $64,000 in the year ended June 30, 2023 relate to changes in assumptions regarding the realizability of the charitable contribution carryover. All other deferred tax assets as of June 30, 2024 and 2023 have not been reduced by a valuation allowance because management believes that it is more likely than not that the full amount of these deferred tax assets will be realized.

The federal income tax reserve for loan losses at the Company’s base year amounted to $2,582,000. If any portion of the reserve is used for purposes other than to absorb loan losses, approximately 150% of the amount actually used, limited to the amount of the reserve, would be subject to taxation in the fiscal year in which used. As the Company intends to use the reserve only to absorb loan losses, a deferred income tax liability of $726,000 has not been provided.

The Company and the Company’s income tax returns are subject to review and examination by federal and state taxing authorities. The Company is currently open to audit under the applicable statues of limitations by the internal revenue service for the years ended December 2020 through 2023. The years open to examination by state taxing authorities vary by jurisdiction; no years prior to 2020 are open.

At June 30, 2024, the company has a net operating loss carryover of $493,000 with no expiration date.