12. Income Taxes
The table below summarizes the income tax expense (benefit) for the years ended June 30, 2017 and 2016:
|
(Dollars in thousands) |
|
2017 |
|
|
2016 |
|
||
|
Current: |
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
305 |
|
|
$ |
4 |
|
|
State |
|
|
48 |
|
|
|
108 |
|
|
|
|
|
353 |
|
|
|
112 |
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
Federal |
|
|
(158 |
) |
|
|
413 |
|
|
State |
|
|
— |
|
|
|
— |
|
|
|
|
|
(158 |
) |
|
|
413 |
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense |
|
$ |
195 |
|
|
$ |
525 |
|
The expense (benefit) for income taxes for the years ended June 30, 2017 and 2016 differed from the federal income tax statutory rate due to the following:
|
|
|
2017 |
|
|
2016 |
|
||||||||||
|
(Dollars in thousands) |
|
Amount |
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
||||
|
Tax at statutory rate |
|
$ |
259 |
|
|
|
34.0 |
% |
|
$ |
525 |
|
|
|
34.0 |
% |
|
State tax net of federal benefit |
|
|
31 |
|
|
|
4.2 |
% |
|
|
72 |
|
|
|
4.7 |
% |
|
Banked-owned life insurance |
|
|
(37 |
) |
|
|
-4.9 |
% |
|
|
(38 |
) |
|
|
-2.5 |
% |
|
Tax-exempt interest |
|
|
(64 |
) |
|
|
-8.8 |
% |
|
|
(53 |
) |
|
|
-3.6 |
% |
|
Other, net |
|
|
6 |
|
|
|
1.1 |
% |
|
|
19 |
|
|
|
1.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
195 |
|
|
|
25.6 |
% |
|
$ |
525 |
|
|
|
33.9 |
% |
Deferred income taxes result from temporary differences in recording certain revenues and expenses for financial reporting purposes. The net deferred tax asset at June 30, 2017 and June 30, 2016 consisted of the following:
|
(Dollars in thousands) |
|
2017 |
|
|
2016 |
|
||
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
Allowance for loan losses |
|
$ |
202 |
|
|
$ |
165 |
|
|
Non-accrual interest |
|
|
25 |
|
|
|
30 |
|
|
Deferred income |
|
|
105 |
|
|
|
111 |
|
|
Accrued expenses |
|
|
70 |
|
|
|
85 |
|
|
Capitalized expenses |
|
|
6 |
|
|
|
8 |
|
|
Unrealized loss on securities |
|
|
77 |
|
|
|
5 |
|
|
Minimum tax credit carryover |
|
|
178 |
|
|
|
125 |
|
|
Federal NOL carryover |
|
|
— |
|
|
|
190 |
|
|
Charitable contribution carryover |
|
|
— |
|
|
|
10 |
|
|
Gross deferred tax assets |
|
$ |
663 |
|
|
$ |
729 |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
Depreciation |
|
$ |
3 |
|
|
$ |
7 |
|
|
Fair value adjustment of IRLC, TBA securites |
|
|
|
|
|
|
|
|
|
and forward loan sales commitments |
|
|
318 |
|
|
|
415 |
|
|
Gain on fair value of loans |
|
|
85 |
|
|
|
281 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax liabilities |
|
|
406 |
|
|
|
703 |
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets |
|
$ |
257 |
|
|
$ |
26 |
|
The net operating loss carryforward of $560,000 at June 30, 2016 was utilized during the year ended June 30, 2017.
The Company has Alternative Minimum Tax (“AMT”) credits of $178,000 and $125,000 as of June 30, 2017 and 2016, respectively, which have an indefinite life.
Retained earnings included $1.7 million at June 30, 2017 and 2016, for which no provision for federal income tax has been made. This amount represents deductions for bad debt reserves for tax purposes, which were only allowed to savings institutions that met certain criteria prescribed by the Internal Revenue Code of 1986, as amended. The Small Business Job Protection Act (the Act) eliminated the special bad debt deduction granted solely to thrifts. Under the terms of the Act, there would be no recapture of the pre-1988 (base year) reserves. However, these pre-1988 reserves would be subject to recapture under the rules of the Internal Revenue Code if the Company pays a cash dividend in excess of earnings and profits, or liquidates.