INCOME TAXES
The provision for income taxes for the years ended September 30, 2017, 2016, and 2015, consisted of the following:
|
| | | | | | | | | | | | | | | |
| For the Year Ended September 30, 2017 |
| Federal | | State | | Change in Valuation
Allowance | | Total |
| (dollars in thousands) |
Current | $ | (939 | ) | | $ | (34 | ) | | $ | — |
| | $ | (973 | ) |
Deferred | 1,162 |
| | 43 |
| | (2 | ) | | 1,203 |
|
Total | $ | 223 |
| | $ | 9 |
| | $ | (2 | ) | | $ | 230 |
|
|
| | | | | | | | | | | | | | | |
| For the Year Ended September 30, 2016 |
| Federal | | State | | Change in Valuation
Allowance | | Total |
| (dollars in thousands) |
Current | $ | 1,368 |
| | $ | (123 | ) | | $ | — |
| | $ | 1,245 |
|
Deferred | 666 |
| | 97 |
| | 3 |
| | 766 |
|
Total | $ | 2,034 |
| | $ | (26 | ) | | $ | 3 |
| | $ | 2,011 |
|
|
| | | | | | | | | | | | | | | |
| For the Year Ended September 30, 2015 |
| Federal | | State | | Change in Valuation
Allowance | | Total |
| (dollars in thousands) |
Current | $ | (1,378 | ) | | $ | (638 | ) | | $ | — |
| | $ | (2,016 | ) |
Deferred | 4,739 |
| | 973 |
| | 6 |
| | 5,718 |
|
Total | $ | 3,361 |
| | $ | 335 |
| | $ | 6 |
| | $ | 3,702 |
|
The actual income tax expense for fiscal years 2017, 2016, and 2015 differs from the computed ‘expected’ income tax expense (benefit) for those years (computed by applying the currently applicable consolidated United States federal corporate tax rates of 35%, to income before income taxes) as follows:
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| | | | | | | | | | | |
| For the Years Ended September 30, |
| 2017 | | 2016 | | 2015 |
| (dollars in thousands) |
Computed ‘expected’ income tax expense | $ | 224 |
| | $ | 2,040 |
| | $ | 3,217 |
|
State tax (net of federal tax benefit) | 21 |
| | 36 |
| | 567 |
|
Other, net | (15 | ) | | (65 | ) | | (82 | ) |
Total | $ | 230 |
| | $ | 2,011 |
| | $ | 3,702 |
|
The income tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at September 30, 2017 and 2016, are presented below:
|
| | | | | | | |
| As of September 30, |
| 2017 | | 2016 |
| (dollars in thousands) |
Deferred tax assets: | |
| | |
|
Allowance for credit losses | $ | 12,220 |
| | $ | 11,010 |
|
Unearned insurance reserves | 424 |
| | 2,400 |
|
Accrued expenses | 126 |
| | 575 |
|
State net operating losses and credits | 43 |
| | 44 |
|
Other | 418 |
| | 464 |
|
Total deferred tax assets | 13,231 |
| | 14,493 |
|
Valuation allowance | (39 | ) | | (41 | ) |
Deferred tax assets, net of valuation allowance | 13,192 |
| | 14,452 |
|
| | | |
Deferred tax liabilities: | |
| | |
|
Depreciation | 120 |
| | 188 |
|
Other | 90 |
| | 79 |
|
Total deferred tax liabilities | 210 |
| | 267 |
|
| | | |
Net deferred tax assets | $ | 12,982 |
| | $ | 14,185 |
|
As of September 30, 2017, the Company had state net operating loss carry forwards of approximately $1.0 million. The net operating loss carry forwards expire between 2024 and 2036.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.
The Company is included in the consolidated federal income tax return and, for certain states, combined state tax returns of its Parent. Under the benefits-for-loss approach, net operating losses and other tax attributes of the Company are characterized as realized when utilized by the Parent. Therefore, recognition of deferred tax assets is based on all available evidence as it relates to both the Parent and the Company. The Company is party to a tax sharing agreement with its Parent that will reimburse it for any losses utilized in the Parent’s consolidated tax returns. As a result, management believes it is more likely than not that the Company will realize the benefits of those deductible differences based on the Parent’s historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, with the exception of certain state differences. Accordingly, at September 30, 2017 and 2016, the Company recorded a valuation allowance on these deferred tax assets of $39 thousand and $41 thousand, respectively.
As of September 30, 2017, 2016 and 2015, the reserve for uncertain tax positions was $35 thousand, $43 thousand, and $201 thousand respectively, and is included in accrued expenses and other liabilities in the consolidated balance sheet. Reversal of interest and penalties calculated as a result of uncertain tax positions of approximately $1 thousand, $91 thousand and $68 thousand for the years ended September 30, 2017, 2016, and 2015 respectively, were recorded as a component of income tax expense.
A reconciliation of unrecognized tax benefits for fiscal year 2017, 2016 and 2015 is as follows:
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| | | | | | | | | | | |
| As of and for the Years Ended September 30, |
| 2017 | | 2016 | | 2015 |
| (dollars in thousands) |
Balance, beginning of year | $ | 41 |
| | $ | 108 |
| | $ | 309 |
|
Increase in tax positions taken in current periods | 8 |
| | 10 |
| | 7 |
|
Increase in tax positions taken in prior periods | — |
| | — |
| | 1 |
|
Decrease in tax positions taken in prior periods | (1 | ) | | — |
| | (159 | ) |
Decrease due to lapse of applicable statute of limitations | (15 | ) | | (77 | ) | | (50 | ) |
Balance, end of year | $ | 33 |
| | $ | 41 |
| | $ | 108 |
|
The Company does not believe a significant increase or decrease in the balances applicable to uncertain tax positions will occur in the next twelve months.
The Parent’s consolidated federal income tax returns are open and subject to examination by the Internal Revenue Service for the tax year ended September 30, 2014 and later. The Parent and its subsidiaries’ state returns are generally open and subject to examinations for the tax year ended September 30, 2013 for major state jurisdictions. The Company does not believe any adjustments that may result from any examinations related to these tax years will be material to the Company.