Note 11: Income Taxes

12 Months Ended

Jun. 30, 2016

Notes

Note 11: Income Taxes

NOTE 11:  Income Taxes

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

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

(dollars in thousands)	June 30, 2016	June 30, 2015
Deferred tax assets:
Provision for losses on loans	$                             4,760	$                             5,037
Accrued compensation and benefits	885	538
Other-than-temporary impairment on             available for sale securities	139	137
NOL carry forwards acquired	631	768
Minimum Tax Credit	130	130
Unrealized loss on other real estate	183	6
Other	-	319
Total deferred tax assets	6,728	6,935
Deferred tax liabilities:
Purchase accounting adjustments	1,132	1,985
Depreciation	1,781	992
FHLB stock dividends	194	39
Prepaid expenses	177	81
Unrealized gain on available for sale securities	977	502
Other	82	-
Total deferred tax liabilities	4,343	3,599
Net deferred tax (liability) asset	$                             2,385	$                             3,336

As of June 30, 2016, the Company had approximately $1.8 million 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 expense is shown below:

	For the year ended June 30
(dollars in thousands)	2016	2015	2014
Tax at statutory rate	$                             7,536	$                             6,903	$                             4,701
Increase (reduction) in taxes       resulting from:
Nontaxable municipal income	(567)	(530)	(524)
State tax, net of Federal benefit	624	523	296
Cash surrender value of                   Bank-owned life insurance	(325)	(193)	(184)
Tax credit benefits	(286)	(364)	(391)
Other, net	(300)	(283)	(153)
Actual provision	$                             6,682	$                             6,056	$                             3,745

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