INCOME TAXES

12 Months Ended

Mar. 31, 2023

INCOME TAXES

INCOME TAXES

11.  INCOME TAXES

Provision for income taxes consisted of the following for the periods indicated (in thousands):

	Year Ended March 31
	2023		2022		2021
Current	$	5,754	$	5,446	$	4,410
Deferred		(144)		1,010		(1,429)
Total	$	5,610	$	6,456	$	2,981

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are as follows at the dates indicated (in thousands):

	March 31,		March 31,
	2023		2022
Deferred tax assets:
Deferred compensation	$	78	$	57
Allowance for loan losses		3,772		3,588
Accrued expenses		160		170
Accumulated depreciation and amortization		918		881
Deferred gain on sale		34		52
Deferred income		57		107
Purchase accounting		46		74
Net unrealized loss on investment securities available for sale		5,782		3,141
Operating lease liabilities		1,695		1,993
Other		429		420
Total deferred tax assets		12,971		10,483
Deferred tax liabilities:
FHLB stock dividends		(38)		(38)
Prepaid expenses		(241)		(171)
Operating lease ROU assets		(1,609)		(1,898)
Loan fees/costs		(797)		(875)
Total deferred tax liabilities		(2,685)		(2,982)
Deferred tax assets, net	$	10,286	$	7,501

A reconciliation of the Company’s effective income tax rate with the federal statutory tax rate is as follows for the years indicated:

	Year Ended March 31,
	2023		2022		2021
Statutory federal income tax rate	21.0	%	21.0	%	21.0	%
State and local income tax rate	3.0		3.0		3.0
Employee Stock Ownership Plan ("ESOP") market value adjustment	(0.1)		(0.1)		(0.1)
BOLI	(0.8)		(0.7)		(1.5)
Other, net	0.6		(0.4)		(0.3)
Effective federal income tax rate	23.7	%	22.8	%	22.1	%

For the fiscal years ended March 31, 2023 and 2022, the Company utilized a federal corporate income tax rate of 21.0%. The Bank’s retained earnings at March 31, 2023 and 2022 include a base year allowance for loan losses, which amounted to $2.2 million, for which no federal income tax liability has been recognized. The related unrecognized deferred tax liability at March 31, 2023 and 2022 was $528,000. This represents the balance of the allowance for loan losses created for tax purposes as of December 31, 1987. This amount is subject to recapture in the unlikely event that the Company’s banking subsidiaries (1) make distributions in excess of current and accumulated earnings and profits, as calculated for federal tax purposes, (2) redeem their stock, or (3) liquidate. Management does not expect this temporary difference to reverse in the foreseeable future.

At March 31, 2023 and 2022, the Company had no unrecognized tax benefits or uncertain tax positions. In addition, the Company had no accrued interest or penalties related to income tax matters as of March 31, 2023 and 2022. It is the Company’s policy to recognize potential accrued interest and penalties related to income tax matters as a component of the provision for income taxes. The Company is subject to U.S federal and State of Oregon income taxes. The years 2019 to 2022 remain open to examination for federal income taxes, and the years 2019 to 2022 remain open to State of Oregon examination.