Note 11: Income Taxes

12 Months Ended

Jun. 30, 2017

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, 2017	June 30, 2016
Deferred tax assets:
Provision for losses on loans	$                      5,563	$                         4,760
Accrued compensation and benefits	1,068	885
Other-than-temporary impairment on             available for sale securities	128	139
NOL carry forwards acquired	513	631
Minimum Tax Credit	130	130
Unrealized loss on other real estate	131	183
Total deferred tax assets	7,533	6,728
Deferred tax liabilities:
Purchase accounting adjustments	1,193	1,132
Depreciation	2,734	1,781
FHLB stock dividends	203	194
Prepaid expenses	213	177
Unrealized gain on available for sale securities	295	977
Other	991	82
Total deferred tax liabilities	5,629	4,343
Net deferred tax (liability) asset	$                      1,904	$                         2,385

 As of June 30, 2017, the Company had approximately $1.3 million and $3.2 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)	2017	2016	2015
Tax at statutory rate	$                      7,565	$                       7,536	$                       6,903
Increase (reduction) in taxes       resulting from:
Nontaxable municipal income	(513)	(567)	(530)
State tax, net of Federal benefit	215	624	523
Cash surrender value of                   Bank-owned life insurance	(397)	(325)	(193)
Tax credit benefits	(367)	(286)	(364)
Other, net	(441)	(300)	(283)
Actual provision	$                      6,062	$                       6,682	$                       6,056

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