INCOME TAXES
Income tax expense (benefit) for each of the periods shown below consisted of the following:
|
| | | | | | | |
| 2017 | | 2016 |
Current tax provision | | | |
Federal | $ | 572 |
| | $ | 683 |
|
State | 117 |
| | 131 |
|
| 689 |
| | 814 |
|
Deferred tax provision (benefit) | | | |
Federal | 535 |
| | 406 |
|
State | 99 |
| | 66 |
|
| 634 |
| | 472 |
|
Total | $ | 1,323 |
| | $ | 1,286 |
|
The provision for income taxes differs from the amount of income tax determined by applying statutory federal income tax rates to pretax income as result of the following differences:
|
| | | | | | | | | | | | | |
| 2017 | | 2016 |
| Amount | | Rate | | Amount | | Rate |
Tax expense at statutory rate | $ | 1,299 |
| | 34.00 | % | | $ | 1,312 |
| | 34.00 | % |
State income taxes net of federal | 216 |
| | 5.64 | % | | 197 |
| | 5.10 | % |
Tax exempt interest | (229 | ) | | (5.98 | )% | | (166 | ) | | (4.26 | )% |
Other | 37 |
| | 0.96 | % | | (57 | ) | | (1.51 | )% |
Total | $ | 1,323 |
| | 34.62 | % | | $ | 1,286 |
| | 33.33 | % |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following is a summary of the significant components of the Company’s deferred tax assets and liabilities as of September 30, 2017 and September 30, 2016, respectively:
|
| | | | | | | |
| 2017 | | 2016 |
Deferred tax assets: | | | |
Allowance for loan losses | $ | 2,347 |
| | $ | 2,377 |
|
Deferred loan costs/fees | 51 |
| | 77 |
|
Director/officer compensation plans | 90 |
| | 299 |
|
Net unrealized loss on securities available for sale | 178 |
| | — |
|
Economic performance accruals | — |
| | 131 |
|
Other real estate | 304 |
| | — |
|
Deferred revenue | 143 |
| | — |
|
Loan Discounts | 1,450 |
| | — |
|
Other | 100 |
| | 177 |
|
Deferred tax assets | $ | 4,663 |
| | $ | 3,061 |
|
Deferred tax liabilities: | | | |
Office properties and equipment | (1,039 | ) | | (291 | ) |
Federal Home Loan Bank stock | (128 | ) | | — |
|
Core Deposit Intangible | (1,628 | ) | | — |
|
Other real estate | (114 | ) | | — |
|
Net unrealized gain on securities available for sale | — |
| | (409 | ) |
Prepaid expenses | (147 | ) | | — |
|
Mortgage servicing rights | (685 | ) | | — |
|
Other acquired intangibles | (264 | ) | | — |
|
Other | — |
| | (98 | ) |
Deferred tax liabilities | (4,005 | ) | | (798 | ) |
Net deferred tax assets | $ | 658 |
| | $ | 2,263 |
|
The Company regularly reviews the carrying amount of its deferred tax assets to determine if the establishment of a valuation allowance is necessary, as further discussed in Note 1 “Nature of Business and Summary of Significant Accounting Policies,” above. At September 30, 2017 and September 30, 2016, respectively, management determined that no valuation allowance was necessary.
The Company’s income tax returns are subject to review and examination by federal, state and local government authorities. As of September 30, 2017, years open to examination by the U.S. Internal Revenue Service include taxable years ended September 30, 2014 to present. The years open to examination by state and local government authorities varies by jurisdiction.
The tax effects from uncertain tax positions can be recognized in the financial statements, provided the position is more likely than not to be sustained on audit, based on the technical merits of the position. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized, upon ultimate settlement with the relevant tax authority. The Company applied the foregoing accounting standard to all of its tax positions for which the statute of limitations remained open as of the date of the accompanying consolidated financial statements.
The Company’s policy is to recognize interest and penalties related to income tax issues as components of other noninterest expense. During the twelve months ended September 30, 2017 and 2016, the Company recognized penalties and interest expense in the amount of $0 and $24, respectively, related to income tax issues which is included in other noninterest expense in its consolidated statements of operations. The Company had a recorded liability of $11 and $24, which is included in other liabilities in its consolidated balance sheets, for the payment of interest and penalties related to income tax issues as of September 30, 2017 and 2016, respectively.