Note 11: Income Taxes

12 Months Ended

Jun. 30, 2015

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, 2015	June 30, 2014
Deferred tax assets:
Provision for losses on loans	$5,037	$3,696
Accrued compensation and benefits	538	450
Other-than-temporary impairment on             available for sale securities	137	141
NOL carry forwards acquired	768	853
Minimum Tax Credit	130	130
Unrealized loss on other real estate	6	38
Other	319	-
Total deferred tax assets	6,935	5,308
Deferred tax liabilities:
FHLB stock dividends	39	157
Purchase accounting adjustments	1,985	1,533
Depreciation	992	767
Prepaid expenses	81	250
Unrealized gain on available for sale securities	502	336
Other	-	164
Total deferred tax liabilities	3,599	3,207
Net deferred tax (liability) asset	$3,336	$2,101

As of June 30, 2015, the Company had approximately $1.8 million and $5.2 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 the 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)	2015	2014	2013
Tax at statutory rate	$6,903	$4,701	$4,767
Increase (reduction) in taxes resulting from:
Nontaxable municipal income	(530)	(524)	(506)
State tax, net of Federal benefit	523	296	336
Cash surrender value of Bank-owned life insurance	(193)	(184)	(173)
Tax credit benefits	(364)	(391)	(342)
Other, net	(283)	(153)	(128)
Actual provision	$6,056	$3,745	$3,954

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