Entity information:
Income Taxes

The following table presents the provision for income taxes as of:
 
Years Ended September 30,
 
2017
 
2016
 
 
Current (benefit) expense
$
147

 
$
(1
)
Deferred expense
1,517

 
1,987

 
 
 
 
 
$
1,664

 
$
1,986



A reconciliation of expected income tax expense to the income tax expense included in the consolidated statements of operations is as follows:
 
Year Ended September 30,
 
2017
 
2016
 
 
 
% of Pretax
 
 
 
% of Pretax
 
Amount
 
Income
 
Amount
 
Income
 
 
Computed "expected" tax expense
$
1,534

 
34.00
 %
 
$
1,855

 
34.00
 %
Net increase in cash surrender of life insurance
(146
)
 
(3.24
)%
 
(146
)
 
(2.68
)%
Tax-exempt interest, net
(211
)
 
(4.68
)%
 
(67
)
 
(1.23
)%
Increase from state income tax expense, net
376

 
8.34
 %
 
400

 
7.32
 %
Equity incentive plans
46

 
1.02
 %
 
45

 
0.82
 %
Other, net
65

 
1.44
 %
 
(101
)
 
(1.85
)%
 
 
 
 
 
 
 
 
 
$
1,664

 
36.88
 %
 
$
1,986

 
36.38
 %


The net deferred tax asset includes the following amounts of deferred tax assets and liabilities as of:
 
 
September 30,
 
 
2017
 
2016
 
 
 
Deferred tax assets:
 
 
 
 
Allowance for loan losses
 
$
2,259

 
$
2,056

Non-qualified option expense
 
126

 
90

Restricted stock expense
 
61

 
57

Deferred compensation
 
735

 
750

Deferred directors fees
 
95

 
214

Loss carryforward
 
1,896

 
3,668

Non accrual interest
 
1

 
2

Charitable contribution
 
141

 
130

Unrealized loss on securities available-for-sale
 
366

 
—

Other
 
332

 
263

 
 
 
 
 
       Total deferred tax assets
 
6,012

 
7,230

 
 
 
 
 
Deferred tax liabilities:
 
 
 
 
   Prepaid expenses
 
(228
)
 
(217
)
   Mortgage servicing rights
 
(276
)
 
(314
)
   Office properties and equipment basis difference
 
(755
)
 
(768
)
   Federal Home Loan Bank stock basis difference
 
(117
)
 
(144
)
   Unrealized gain on securities available-for-sale
 
—

 
(362
)
 
 
 
 
 
       Total deferred tax liabilities
 
(1,376
)
 
(1,805
)
 
 
 
 
 
Valuation allowance
 
—

 
—

 
 
 
 
 
       Net deferred tax asset
 
$
4,636

 
$
5,425

 
 
 
 
 


The Company has State of Wisconsin net operating loss carryforwards of approximately $7,933 and $14,197 at September 30, 2017 and 2016, respectively, which can be used to offset its future state taxable income. The carryforwards start to expire in 2024.

The Company has Federal net operating loss carryforwards of approximately $1,765 and $6,854 at September 30, 2017 and 2016, respectively, which can be used to offset its future federal taxable income. These Federal carryforwards start to expire in 2030.

The Internal Revenue Code of 1986, as amended, imposes an alternative minimum tax at a rate of 20% on a base of regular taxable income plus certain tax preferences, referred to as “alternative minimum taxable income.” The alternative minimum tax is payable to the extent alternative minimum taxable income is in excess of an exemption amount. Net operating losses can, in general, offset no more than 90% of alternative minimum taxable income. Certain payments of alternative minimum tax may be used as credits against regular tax liabilities in future years. At September 30, 2017, the Company had $959 of minimum tax credit carryforwards which do not expire.
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 performed an evaluation of the Company's deferred tax assets as of September 30, 2017 and 2016. In making the determination whether a deferred tax asset is more likely than not to be realized, we seek to evaluate all available positive and negative evidence. Negative evidence considered included our pre-tax losses and relatively high level of net loan charge-offs, loan loss provisions and foreclosed real estate losses from 2009 through 2014. Positive evidence reviewed included our historical earnings performance prior to the recession and during the three most recent years, our use of net operating loss carryforwards to reduce our current tax obligation, our projected earnings forecast, significantly reduced levels of non-performing assets, loan loss provisions and net charge-offs in 2016 and 2017 and the reduction of credit risk in our loan portfolio. Based on our analysis at September 30, 2017 and September 30, 2016, we concluded that there is more positive evidence than negative regarding the utilization of our deferred tax asset and that the recorded deferred tax asset, with no valuation reserve required at September 30, 2017 and 2016, is realizable.

Under the Internal Revenue Code and Wisconsin Statutes, the Bank was permitted to deduct, for tax years beginning before 1997, an annual addition to a reserve for bad debts. The amount differed from the provision for loan losses recorded for financial accounting purposes. Under prior law, bad debt deductions for income tax purposes were included in taxable income of later years only if the bad debt reserves were used for purposes other than to absorb bad debt losses. Because the Company did not intend to use the reserve for purposes other than to absorb losses, no deferred income taxes were provided. Retained earnings as of September 30, 2017 and 2016, include approximately $3,227 for which no deferred federal or state income taxes were provided. If in the future the Company no longer qualifies as a bank for tax purposes, an income tax expense of $1,266 would be incurred.

The Company files income tax returns in the U.S. federal jurisdiction and the state of Wisconsin. With few exceptions, the Company is no longer subject to U.S. federal tax examinations by tax authorities for years before 2013 and state tax examinations by tax authorities for years before 2012.