Note 8: Income Taxes

3 Months Ended

Sep. 30, 2017

Notes

Note 8: Income Taxes

Note 8: 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 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 period ended
(dollars in thousands)	September 30, 2017	September 30, 2016
Income taxes
Current	$1,883	$117
Deferred	6	1,241
Total income tax provision	$1,889	$1,358

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

(dollars in thousands)	September 30, 2017	June 30, 2017
Deferred tax assets:
Provision for losses on loans	$5,706	$5,563
Accrued compensation and benefits	822	1,068
Other-than-temporary impairment on     available for sale securities	122	128
NOL carry forwards acquired	475	513
Minimum Tax Credit	130	130
Unrealized loss on other real estate	127	131
Total deferred tax assets	7,382	7,533
Deferred tax liabilities:
Purchase accounting adjustments	1,145	1,193
Depreciation	2,658	2,734
FHLB stock dividends	197	203
Prepaid expenses	171	213
Unrealized gain on available for sale securities	307	295
Other	1,018	991
Total deferred tax liabilities	5,497	5,629
Net deferred tax asset	$1,885	$1,904

As of September 30, 2017 the Company had approximately $1.3 million and $3.2 million in federal and state net operating loss carryforwards, respectively, 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 period ended
(dollars in thousands)	September 30, 2017	September 30, 2016
Tax at statutory rate	$                             2,363	$                             1,773
Increase (reduction) in taxes       resulting from:
Nontaxable municipal income	(139)	(132)
State tax, net of Federal benefit	96	47
Cash surrender value of                   Bank-owned life insurance	(82)	(74)
Tax credit benefits	(224)	(93)
Other, net	(125)	(163)
Actual provision	$                             1,889	$                             1,358

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