Note 10. Income Taxes

The Company and its subsidiary file consolidated federal income tax returns. The current provision for federal and state income taxes is calculated on pretax accounting income adjusted by items considered to be permanent differences between book and taxable income. Income tax expense for the years ended June 30, 2015 and 2014, is summarized as follows:

	2015			2014
	(In Thousands)

Current	$	1,725		$	1,346
Deferred		(64	)		(14	)

Total	$	1,661		$	1,332

The effective federal income tax rate for the years ended June 30, 2015 and 2014, was 33.1% and 32.7%, respectively. Reconciliations of income tax expense at the statutory rate to the Company's effective rates are as follows:

	2015			2014
	(In Thousands)

Computed at Expected Statutory Rate	$	1,706		$	1,386
Capital Gains and Losses		--			6
Non-Taxable Income		(56	)		(60	)
Other		11			--

Provision for Income Tax Expense	$	1,661		$	1,332

At June 30, 2015 and 2014, temporary differences between the financial statement carrying amount and tax bases of assets that gave rise to deferred tax recognition were related to the effect of loan bad debt deduction differences for tax and book purposes, deferred stock option compensation and non-deductible capital losses. The deferred tax expense or benefit related to securities available-for-sale has no effect on the Company's income tax provision since it is charged or credited to the Company's other comprehensive income or loss equity component. A valuation allowance has been established to eliminate the deferred tax benefit of capital losses due to the uncertainty as to whether the tax benefits would be realized in future periods.

The net deferred income tax asset and liability consisted of the following components at June 30, 2015 and 2014:

	2015			2014
	(In Thousands)
Deferred Tax Assets
Stock Option Compensation	$	127		$	104
Loans Receivable - Bad Debt Loss Allowance		749			708
Capital Losses		110			109
		986			921
Valuation Allowance		(110	)		(109	)

Net Deferred Tax Assets		876			812

Deferred Tax Liabilities
Market Value Adjustment to Available-for-Sale Securities		(52	)		(89	)

Net Deferred Tax Assets	$	824		$	723

In computing federal taxes on income under provisions of the Internal Revenue Code in years past, earnings appropriated by savings and loan associations to general reserves were deductible in arriving at taxable income if certain conditions were met. Bank retained earnings appropriated to the federal insurance reserve at June 30, 2015 and 2014, amounted to $4.0 million. Included were appropriations of net income of prior years of $3.3 million, for which no provision for federal income taxes has been made. If this portion of the reserve is used for any purpose other than to absorb losses, a tax liability will be imposed upon the Bank at the then current federal income tax rate.

Accounting principles generally accepted in the United States of America provide accounting and disclosure guidance about positions taken by an entity in its tax returns that might be uncertain. The Company believes that it has appropriate support for any tax positions taken, and as such, does not have any uncertain tax positions that are material to the consolidated financial statements.

Penalties and interest assessed by income taxing authorities, if any, would be included in income tax expense.