Note 8: Income Taxes

9 Months Ended

Mar. 31, 2016

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 examinations by tax authorities for fiscal years before 2011. The Company recognized no interest or penalties related to income taxes.

The Company’s income tax provision is comprised of the following components:

	For the three-month periods ended		For the nine-month periods ended
(dollars in thousands)	March 31, 2016	March 31, 2015	March 31, 2016	March 31, 2015
Income taxes
Current	$437	$1,616	$4,562	$5,081
Deferred	1,107	(119)	468	(743)
Total income tax provision	$1,544	$1,497	$5,030	$4,338

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

(dollars in thousands)	March 31, 2016	June 30, 2015
Deferred tax assets:
Provision for losses on loans	$4,706	$5,037
Accrued compensation and benefits	907	538
Other-than-temporary impairment on available for sale securities	141	137
NOL carry forwards acquired	654	768
Minimum Tax Credit	130	130
Unrealized loss on other real estate	93	6
Unrealized loss on available for sale securities	-	-
Other	-	319
Total deferred tax assets	6,630	6,935

Deferred tax liabilities:
Purchase accounting adjustments	1,107	1,985
Depreciation	1,570	992
FHLB stock dividends	194	39
Prepaid expenses	238	81
Unrealized gain on available for sale securities	699	502
Other	152	-
Total deferred tax liabilities	3,959	3,599

Net deferred tax (liability) asset	$2,671	$3,336

As of March 31, 2016 and June 30, 2015, the Company had approximately $1.8 and $3.9 million in federal and state net operating loss carryforwards, which were acquired in the July 2009 acquisition of Southern Bank of Commerce, the February 2014 acquisition of Citizens State Bankshares of Bald Knob, Inc. and the August 2014 acquisition of Peoples Service Company. The amount reported is net of the IRC Sec. 382 limitation, or state equivalent, related to 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 is shown below:

	For the three-month periods ended		For the nine-month periods ended
(dollars in thousands)	March 31, 2016	March 31, 2015	March 31, 2016	March 31, 2015
Tax at statutory rate	$1,703	$1,653	$5,669	$4,910
Increase (reduction) in taxes resulting from:
Nontaxable municipal income	(142)	(133)	(418)	(398)
State tax, net of Federal benefit	145	133	473	380
Cash surrender value of Bank-owned life insurance	(50)	(47)	(256)	(145)
Tax credit benefits	(63)	(91)	(188)	(272)
Tax benefits realized on acquisition	-	-	-	-
Acquisition costs	-	-	-	-
Other, net	(49)	(18)	(250)	(136)
Actual provision	$1,544	$1,497	$5,030	$4,338

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