Entity information:
NOTE 8 — INCOME TAXES
Income tax expense for the years ended June 30, 2017 and 2016 was as follows:
​ ​ ​
June 30, 
2017
 ​ ​
June 30, 
2016
 ​
Current federal expense
 ​ ​ ​ $ 1,326 ​ ​ ​ ​ $ 232 ​ ​
Current state expense
 ​ ​ ​ ​ 263 ​ ​ ​ ​ ​ 194 ​ ​
Deferred federal expense (benefit)
 ​ ​ ​ ​ (116) ​ ​ ​ ​ ​ 1,590 ​ ​
Deferred state expense
 ​ ​ ​ ​ 5 ​ ​ ​ ​ ​ 16 ​ ​
Total
 ​ ​ ​ $ 1,478 ​ ​ ​ ​ $ 2,032 ​ ​
​
Temporary differences between tax and financial reporting that result in net deferred tax assets are as follows at June 30, 2017 and 2016:
​ ​ ​
June 30, 
2017
 ​ ​
June 30, 
2016
 ​
Deferred tax assets: ​ ​ ​
Fair value adjustments from acquisition
 ​ ​ ​ $ 832 ​ ​ ​ ​ $ 1,438 ​ ​
Allowance for loan losses
 ​ ​ ​ ​ 386 ​ ​ ​ ​ ​ 325 ​ ​
Deferred compensation
 ​ ​ ​ ​ 251 ​ ​ ​ ​ ​ 266 ​ ​
Basis difference in premises and equipment
 ​ ​ ​ ​ 283 ​ ​ ​ ​ ​ 143 ​ ​
Acquired net operating loss (“NOL”)
 ​ ​ ​ ​ 125 ​ ​ ​ ​ ​ 132 ​ ​
Equity compensation plans
 ​ ​ ​ ​ 55 ​ ​ ​ ​ ​ 64 ​ ​
Real estate owned
 ​ ​ ​ ​ 9 ​ ​ ​ ​ ​ 39 ​ ​
Securities available-for-sale
 ​ ​ ​ ​ 114 ​ ​ ​ ​ ​ — ​ ​
Deferred loan fees, net
 ​ ​ ​ ​ 268 ​ ​ ​ ​ ​ — ​ ​
Other
 ​ ​ ​ ​ 188 ​ ​ ​ ​ ​ 155 ​ ​
Total deferred tax assets
 ​ ​ ​ ​ 2,511 ​ ​ ​ ​ ​ 2,562 ​ ​
Deferred tax liabilities: ​ ​ ​
Securities available-for-sale
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ (1,017) ​ ​
Prepaid expenses
 ​ ​ ​ ​ (70) ​ ​ ​ ​ ​ (97) ​ ​
FHLB stock dividends
 ​ ​ ​ ​ (71) ​ ​ ​ ​ ​ (71) ​ ​
Deferred loan fees, net
 ​ ​ ​ ​ — ​ ​ ​ ​ ​ (249) ​ ​
Total deferred tax liabilities
 ​ ​ ​ ​ (141) ​ ​ ​ ​ ​ (1,434) ​ ​
Net deferred tax asset
 ​ ​ ​ $ 2,370 ​ ​ ​ ​ $ 1,128 ​ ​
​
A NOL of  $375 was acquired in the Stephens Federal Bank acquisition. At June 30, 2017 and 2016, the NOL remaining totaled $323 and $344, respectively, with a deferred tax asset of  $125 and $132, respectively. The NOL will expire in 2034. The realization of the deferred tax asset resulting from the NOL is dependent upon generating sufficient taxable income prior to the NOL’s expiration. In assessing the realizability of the deferred tax asset, management considered whether it is more likely than not that some portion or all of the deferred tax asset would not be realized. Based on the Company’s current and expected future financial performance as well as strong asset quality, management determined that no valuation allowance was necessary at June 30, 2017.
Retained earnings as of June 30, 2017 and 2016 includes approximately $5,284 representing reserve method bad debt reserves originating prior to December 31, 1987 for which no deferred income taxes are required to be provided. These reserves may be included in taxable income if the Company pays dividends in excess of its accumulated earnings and profits (as defined by the Internal Revenue Code) or in the event of a distribution in partial or complete liquidation of the Company.
A reconciliation of the amount computed by applying the federal statutory rate (34%) to pretax income with income tax expense for the years ended June 30, 2017 and 2016 is as follows:
​ ​ ​
June 30, 
2017
 ​ ​
June 30, 
2016
 ​
​ ​ ​
Amount
 ​ ​
%
 ​ ​
Amount
 ​ ​
%
 ​
Tax at statutory federal income tax rate
 ​ ​ ​ $ 2,381 ​ ​ ​ ​ ​ 34.00% ​ ​ ​ ​ $ 2,475 ​ ​ ​ ​ ​ 34.00% ​ ​
Increase (decrease) resulting from: ​ ​ ​ ​ ​
State income tax expense
 ​ ​ ​ ​ 177 ​ ​ ​ ​ ​ 2.53 ​ ​ ​ ​ ​ 139 ​ ​ ​ ​ ​ 1.91 ​ ​
Life insurance benefits
 ​ ​ ​ ​ (175) ​ ​ ​ ​ ​ (2.50) ​ ​ ​ ​ ​ (175) ​ ​ ​ ​ ​ (2.40) ​ ​
Tax exempt interest income
 ​ ​ ​ ​ (251) ​ ​ ​ ​ ​ (3.58) ​ ​ ​ ​ ​ (174) ​ ​ ​ ​ ​ (2.39) ​ ​
Other – net
 ​ ​ ​ ​ (654) ​ ​ ​ ​ ​ (9.34) ​ ​ ​ ​ ​ (233) ​ ​ ​ ​ ​ (3.20) ​ ​
Total
 ​ ​ ​ $ 1,478 ​ ​ ​ ​ ​ 21.11% ​ ​ ​ ​ $ 2,032 ​ ​ ​ ​ ​ 27.92% ​ ​
​
The Company has uncertain tax positions and related tax reserves in place for the years ended June 30, 2017 and 2016 of  $100 and $186, respectively. No amounts were accrued for penalties or interest as of June 30, 2017 and 2016. The Company is subject to U.S. federal income tax as well as income tax of the states of South Carolina and Georgia. The Company is no longer subject to examination by taxing authorities for years before 2014.