Entity information:
Note 7:
Income Taxes
 
Income tax benefit for the years ended June 30, 2017 and 2016, was as follows:
 
 
 
Year Ended June 30,
 
 
 
2017
 
2016
 
 
 
(In thousands)
 
Federal-current
 
$
-
 
$
-
 
Federal-deferred
 
 
142
 
 
(33)
 
Change in valuation allowance
 
 
(1,439)
 
 
(680)
 
Total
 
$
(1,297)
 
$
(713)
 
 
A reconciliation of the federal income tax benefit at the statutory rate to the Company’s actual income tax benefit is shown below:
 
 
 
Year Ended June 30,
 
 
 
2017
 
2016
 
 
 
(In thousands)
 
 
 
 
 
 
 
Computed at statutory rate (34%)
 
$
67
 
$
(8)
 
Increase (decrease) resulting from:
 
 
 
 
 
 
 
Bank-owned life insurance
 
 
(32)
 
 
(32)
 
Deferred tax asset valuation allowance
 
 
(1,439)
 
 
(680)
 
Nondeductible expenses
 
 
10
 
 
7
 
Other
 
 
97
 
 
-
 
 
 
 
 
 
 
 
 
Actual income tax benefit
 
$
(1,297)
 
$
(713)
 
 
The composition of the Company’s net deferred tax asset at June 30, 2017 and 2016, is as follows:
 
 
 
June 30,
 
 
 
2017
 
2016
 
 
 
(In thousands)
 
Deferred tax assets
 
 
 
 
 
 
 
Allowance for loan losses
 
$
558
 
$
556
 
Other-than-temporary impairment
 
 
71
 
 
71
 
Net operating loss carry forward
 
 
1,947
 
 
1,925
 
Unrealized losses on available-for-sale securities
 
 
3
 
 
-
 
Stock compensation
 
 
24
 
 
-
 
Other
 
 
10
 
 
47
 
 
 
 
 
 
 
 
 
Deferred tax assets
 
 
2,613
 
 
2,599
 
 
 
 
 
 
 
 
 
Deferred tax liabilities
 
 
 
 
 
 
 
Federal Home Loan Bank stock dividends
 
 
(293)
 
 
(293)
 
Book/tax depreciation differences
 
 
(22)
 
 
(25)
 
Deferred loan orgination fees
 
 
(25)
 
 
(20)
 
Cash versus accrual basis of accounting
 
 
(119)
 
 
(87)
 
Other
 
 
(51)
 
 
(22)
 
 
 
 
 
 
 
 
 
Deferred tax liabilities
 
 
(510)
 
 
(447)
 
 
 
 
 
 
 
 
 
Net deferred tax asset before valuation allowance
 
 
2,103
 
 
2,152
 
 
 
 
 
 
 
 
 
Valuation allowance
 
 
 
 
 
 
 
Beginning balance
 
 
(1,439)
 
 
(2,119)
 
Decrease during year
 
 
1,439
 
 
680
 
 
 
 
 
 
 
 
 
Ending balance
 
 
-
 
 
(1,439)
 
 
 
 
 
 
 
 
 
Net deferred tax asset
 
$
2,103
 
$
713
 
 
  As of June 30, 2015, the net deferred tax asset, before valuation allowance, was $2.1 million. Management maintained a valuation allowance against the net deferred tax asset at June 30, 2015, based on consideration of, but not limited to, its cumulative pre-tax losses during the three years prior to fiscal 2015, the composition of recurring and non-recurring income from operations over those prior years and the magnitude of recent taxable income as compared to net operating loss carryforwards. When determining the amount of deferred tax assets that are more likely than not to be realized, and therefore recorded as a benefit, the Company conducts a regular assessment of all available information. This information includes, but is not limited to, taxable income in prior periods, projected future income and projected future reversals of deferred tax items. During the years ended June 30, 2017 and 2016, based on a review of the analysis, primarily including recent profitable operating results and projected operating results, management determined that a reversal of the valuation allowance was appropriate and, as a result, recorded a $1.4 million and $680,000 reduction to the valuation allowance, in those respective years, crediting the federal income tax provision. At June 30, 2017, the Company had $5.7 million in net operating loss carryforwards, which begin to expire in the year ending in 2031.
 
Retained earnings at both June 30, 2017 and 2016 includes approximately $2.0 million, respectively, for which no deferred federal income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which would be subject to the then-current corporate income tax rate. The deferred income tax liability on the preceding amount that would have been recorded if it was expected to reverse into taxable income in the foreseeable future was approximately $680,000 at June 30, 2017 and 2016, respectively.
 
As of June 30, 2017 and 2016, the Company had no unrecognized tax benefits or accrued interest and penalties recorded. The Company does not expect the total amount of unrecognized tax benefits to significantly increase within the next twelve months. The Company will record interest and penalties as a component of income tax expense.
 
The Company is subject to U.S. federal income tax and Ohio franchise tax. The Company is subject to tax in Ohio based on its net worth. The Company is no longer subject to examination by taxing authorities for fiscal years prior to 2014.