Note 9: Income Taxes

6 Months Ended

Dec. 31, 2019

Notes

Note 9: Income Taxes

Note 9: 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 federal and state examinations by tax authorities for tax years ending June 30, 2015 and before.  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				For the six-month periods ended
(dollars in thousands)		December 31, 2019		December 31, 2018		December 31, 2019		December 31, 2018
Income taxes
Current	$	1,915	$	3,368	$	3,884	$	5,029
Deferred		6		(1,566)		12		(1,560)
Total income tax provision	$	1,921	$	1,802	$	3,896	$	3,469

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

(dollars in thousands)		December 31, 2019		June 30, 2019
Deferred tax assets:
Provision for losses on loans	$	4,873	$	4,601
Accrued compensation and benefits		567		692
NOL carry forwards acquired		174		199
Minimum Tax Credit		130		130
Unrealized loss on other real estate		51		134
Purchase accounting adjustments		-		255
Losses and credits from LLC's		1,100		1,206
Total deferred tax assets		6,895		7,217
Deferred tax liabilities:
Purchase accounting adjustments		164		-
Depreciation		1,411		1,749
FHLB stock dividends		120		120
Prepaid expenses		238		313
Unrealized gain on available for sale securities		477		364
Other		-		61
Total deferred tax liabilities		2,410		2,607
Net deferred tax asset	$	4,485	$	$4,610

As of December 31, 2019 the Company had approximately $963,000 and $1.7 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 periods ended				For the six-month periods ended
(dollars in thousands)	December 31, 2019		December 31, 2018		December 31, 2019		December 31, 2018
Tax at statutory rate	$	2,024	$	1,944	$	$4,083	$	3,722
Increase (reduction) in taxes  resulting from:
Nontaxable municipal income		(113)		(77)		(226)		(149)
State tax, net of Federal benefit		87		101		196		224
Cash surrender value of      Bank-owned life insurance		(53)		(125)		(106)		(176)
Tax credit benefits		(4)		(68)		(6)		(136)
Other, net		(20)		27		(45)		(16)
Actual provision	$	1,921	$	1,802	$	3,896	$	3,469

For the three- and six- month periods ended December 31, 2019 and December 31, 2018, income tax expense at the statutory rate was calculated using a 21% annual effective tax rate (AETR).  

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