| Note 9: | Income Taxes |
The Company and its subsidiary file income tax returns in the U.S. federal jurisdiction and the States of Illinois and Missouri. During the years ended June 30, 2017 and 2016, the Company did not recognize expense for interest or penalties.
The provision for income taxes includes these components:
| 2017 | 2016 | |||||||
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Taxes currently payable |
$ | 2,606 | $ | 2,244 | ||||
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Deferred income taxes |
(332 | ) | (230 | ) | ||||
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Income tax expense |
$ | 2,274 | $ | 2,014 | ||||
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A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is shown below:
| 2017 | 2016 | |||||||
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Computed at the statutory rate (34%) |
$ | 2,106 | $ | 1,897 | ||||
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Increase (decrease) resulting from |
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Tax exempt interest |
(25 | ) | (50 | ) | ||||
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Cash surrender value of life insurance |
(91 | ) | (90 | ) | ||||
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State income taxes |
244 | 208 | ||||||
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Other |
40 | 49 | ||||||
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Actual tax expense |
$ | 2,274 | $ | 2,014 | ||||
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Tax rate as a percentage of pre-tax income |
36.7 | % | 36.1 | % | ||||
The tax effects of temporary differences related to deferred taxes shown on the consolidated balance sheets were:
| 2017 | 2016 | |||||||
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Deferred tax assets |
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Allowance for loan losses |
$ | 2,672 | $ | 2,091 | ||||
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Reserve for uncollectible interest |
37 | 90 | ||||||
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Accrued retirement liability |
864 | 891 | ||||||
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Deferred compensation |
456 | 395 | ||||||
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Deferred loan fees |
117 | 186 | ||||||
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Charitable foundation contribution |
— | 234 | ||||||
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Postretirement health plan |
225 | 270 | ||||||
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Unrealized losses on available-for-sale securities |
11 | — | ||||||
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Accrued vacation |
45 | 21 | ||||||
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Other |
47 | 23 | ||||||
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| 4,474 | 4,201 | |||||||
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Deferred tax liabilities |
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Depreciation |
(163 | ) | (201 | ) | ||||
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Unrealized gains on available-for-sale securities |
— | (1,677 | ) | |||||
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Federal Home Loan Bank stock dividends |
(142 | ) | (304 | ) | ||||
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Mortgage servicing rights |
(278 | ) | (172 | ) | ||||
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Deferred loan expense |
(129 | ) | (100 | ) | ||||
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Other |
(41 | ) | (1 | ) | ||||
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| (753 | ) | (2,455 | ) | |||||
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Net deferred tax asset |
$ | 3,721 | $ | 1,746 | ||||
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Retained earnings at both June 30, 2017 and 2016, include approximately $2,217,000, for which no deferred federal income tax liability has been recognized. These amounts represent 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 liabilities on the preceding amounts that would have been recorded if they were expected to reverse into taxable income in the foreseeable future were approximately $754,000 at both June 30, 2017 and 2016.
The Company established a charitable foundation at the time of its mutual-to-stock conversion and donated to it shares of common stock equal to 7% of the shares sold in the offering, or 314,755 shares. The donated shares were valued at $3,147,550 ($10.00 per share) at the time of conversion. The Association also contributed $450,000 in cash to the Foundation. The $3,147,550 and the $450,000 cash donation, or a total of $3,597,550 was expensed during the quarter ended September 30, 2011. The Company established a deferred tax asset associated with this charitable contribution. The Company deducted the entire contribution, which was subject to limitations each year, during the five year carry forward period, which ended June 30, 2017.