Income Taxes
Income tax expense (benefit) attributable to income from continuing operations for the years ended September 30, 2017, 2016, and 2015 consists of:
|
| | | | | | | | | | | | |
| | Years Ended September 30, |
| | 2017 | | 2016 | | 2015 |
Federal | | | | | | |
Current | | $ | 7,610,295 |
| | $ | 4,817,725 |
| | $ | 863,198 |
|
Deferred | | (93,024 | ) | | 615,015 |
| | 1,683,054 |
|
Total federal tax expense | | 7,517,271 |
| | 5,432,740 |
| | 2,546,252 |
|
State | | | | | | |
Current | | 767,100 |
| | 239,056 |
| | 84,897 |
|
Deferred | | 37,226 |
| | 435,088 |
| | 174,163 |
|
Total state tax expense | | 804,326 |
| | 674,144 |
| | 259,060 |
|
Total income tax expense | | $ | 8,321,597 |
| | $ | 6,106,884 |
| | $ | 2,805,312 |
|
The difference between the actual total provision for federal and state income taxes and federal income taxes computed at the statutory rate of 35% for the years ended September 30, 2017, 2016, and 2015 is summarized as follows:
|
| | | | | | | | | | | | |
| | Years Ended September 30, |
| | 2017 | | 2016 | | 2015 |
| | | | | | |
Computed “expected” tax expense | | $ | 7,965,196 |
| | $ | 6,289,571 |
| | $ | 2,932,116 |
|
Increase (decrease) in tax expense resulting from: | | | | | | |
State income taxes, net of federal tax effect | | 522,812 |
| | 438,194 |
| | 168,389 |
|
Tax-exempt income | | (489,132 | ) | | (571,490 | ) | | (456,866 | ) |
Tax attribute expiration | | — |
| | — |
| | 349,982 |
|
Market value appreciation of ESOP shares | | 165,348 |
| | 87,269 |
| | 62,727 |
|
Management retirement plan | | (127,287 | ) | | (66,542 | ) | | (20,462 | ) |
Excess tax benefit from stock-based compensation | | (95,065 | ) | | — |
| | — |
|
Nondeductible merger expenses | | 96,183 |
| | — |
| | — |
|
Other, net | | 283,542 |
| | (70,118 | ) | | (230,574 | ) |
Income tax expense | | $ | 8,321,597 |
| | $ | 6,106,884 |
| | $ | 2,805,312 |
|
The effective tax rate for the years ended September 30, 2017, 2016, and 2015, was 36.57%, 33.98%, and 33.49%, respectively.
In assessing the reliability 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 by jurisdiction and entity in making this assessment.
Based upon the level of historical taxable income and projections for future taxable income over the periods which the temporary differences resulting in the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefit of these deductible differences at September 30, 2017.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of September 30, 2017 and 2016 are presented below:
|
| | | | | | | | |
| | September 30, |
| | 2017 | | 2016 |
Deferred tax assets: | | | | |
Allowance for loan losses | | $ | 4,309,506 |
| | $ | 4,034,481 |
|
Acquired loans | | 1,050,248 |
| | — |
|
Deferred compensation | | 1,317,386 |
| | 1,714,729 |
|
Stock compensation expense | | 405,112 |
| | 1,089,595 |
|
Real estate acquired through foreclosure | | 3,775 |
| | 171,556 |
|
State credits | | — |
| | 79,291 |
|
Net unrealized holding losses on securities available for sale | | 586,063 |
| | — |
|
Other | | 2,037,060 |
| | 1,508,241 |
|
Total gross deferred tax assets | | 9,709,150 |
| | 8,597,893 |
|
Deferred tax liabilities: | | | | |
Deferred loans cost, net | | 1,069,722 |
| | 935,508 |
|
Depreciation | | 1,056,828 |
| | 2,446,240 |
|
Goodwill amortization | | 812,515 |
| | 138,830 |
|
Net unrealized holding gains on securities available for sale | | — |
| | 568,666 |
|
Other | | 799,803 |
| | 142,127 |
|
Total gross deferred tax liabilities | | 3,738,868 |
| | 4,231,371 |
|
Net deferred tax assets | | $ | 5,970,282 |
| | $ | 4,366,522 |
|
The Company adopted the accounting standard relating to accounting for uncertainty in income taxes during 2009. The Company classifies interest and penalties related to income tax assessments, if any, in income tax expense in the consolidated statements of operations. An audit by the Internal Revenue Service of First Charter, MHC, Charter Federal and CharterBank’s federal income taxes for 2009 to 2011 was completed in fiscal 2013. Tax years 2014, 2015 and 2016 are subject to examination by the Internal Revenue Service. Tax years 2014 through 2016 are subject to examination by state taxing authorities in Georgia, Alabama and Florida. The Company had no material uncertain tax positions at September 30, 2017 and 2016.
There was no unrecognized tax benefit as of September 30, 2017, 2016 or 2015.