Note

14:

Income Taxes

The provisions for income taxes for the years ended

March 31, 2018

and

2017

consist of the following components:

	Year Ended March 31,
	2018			2017
Tax expense (benefit):
Current:
Federal	$	(22,566	)	$	(10,911	)
State	$	(6,599	)		(5,193	)
Deferred tax		8,081,203			(741,901	)
Total tax expense (benefit)	$	8,052,038		$	(758,005	)

A reconciliation of the provision for taxes on income from the statutory federal income tax rate to the effective income tax rates follows:

	Year Ended March 31,
	2018			2017

Tax at statutory federal income tax rate	$	615,952		$	(573,507	)
Tax effect of:
Tax-exempt income		(491,456	)		(260,637	)
State income taxes, net of federal impact		42,442			(90,427	)
Valuation allowance on income tax benefits		5,790,102			-
Impact of the Tax Act		2,318,118			-
Nondeductible expenses and other		55,397			166,566
Other		(278,517	)		-
Income tax expense (benefit)	$	8,052,038		$	(758,005	)

The following is a summary of the tax effects of the temporary differences and tax attributes between financial and income tax accounting that give rise to deferred tax assets and deferred tax liabilities as of

March 31:

	2018			2017
Deferred tax assets:
Allowance for loan losses	$	627,297		$	887,510
Nonaccrual interest		219,172			197,363
Deferred compensation		547,968			822,939
Foreclosed real estate write down and holding costs		162,973			221,010
Deferred loan costs		34,870			42,285
Capital loss carryforward		-			48,872
Charitable contribution carryforward		28,272			42,098
Net operating loss carryforward		3,227,274			4,414,529
Stock based payment awards		66,968			80,833
Unrealized loss on investment securities available for sale		728,266			862,673
AMT credit carryover		245,260			225,294
Acquisition activity		510,506			1,078,763
Other		39,692			-
		6,438,518			8,924,169
Valuation allowance on deferred tax asset		(5,790,102	)		(42,364	)
		648,416			8,881,805

Deferred tax liabilities:
FHLB stock dividends		63,486			91,004
Goodwill and other intangible assets		522,993			717,933
Accumulated depreciation		61,937			65,193
Other		-			30,825
		648,416			904,955

Net deferred tax asset	$	-		$	7,976,850

Deferred income taxes reflect the impact of “temporary differences” between the amount of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. The largest component of our net deferred tax asset at

March 31, 2018

was our net operating loss carryforwards and temporary differences related to the activity in our allowance for loan losses and unrealized loss on investment securities available for sale. The Company records a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more likely than

not,

that some or all of the deferred tax assets will

not

be realized. Due to the Company remaining in a cumulative loss position for

three

consecutive years, management has concluded that it is more likely-than-

not

that the Company will be unable to realize its deferred tax assets in the foreseeable future, and accordingly has established a full valuation allowance of

$5.8

million which equals

100%

of the net deferred tax assets at

March 31, 2018.

If, in the future, the Company generates taxable income on a sustained basis sufficient to support the deferred tax assets, the need for a deferred tax valuation allowance could change, resulting in the reversal of all or a portion of the deferred tax asset valuation at that time.

The Company has a federal net operating loss carryforward (NOL) of

$12.0

million as of

March 31, 2018,

which will expire within the period of the years ending

March 31, 2030

through

2037

including

$4.9

million and

$1.9

million of federal NOL assumed in the acquisition of Fraternity and Fairmount, respectively. As a result of the change in ownership, the utilization of Fraternity and Fairmount’s NOL carryforwards is subject to limitations imposed under Code Section

382

of the Internal Revenue Code. The state NOL for the Company is

$11.0

million and also expires within the same period as the federal NOL. In addition, other tax attributes consisted of charitable contribution carryforwards of

$102,742

and AMT credit carryovers of

$245,620

March 31, 2018.

Under the Tax Act, the AMT credit carryovers are refundable over a period beginning in

2018.

Charitable contribution carryovers have a limited life of

five

years.

December 22, 2017,

the Tax Act was passed into law. The Tax Act included a broad range of tax reform including changes to tax rates and deductions that were effective

January 1, 2018.

The primary change for the Company was the lowering of the federal corporate income tax rate to

21%

from maximum of

35%.

The decrease in the enacted corporate tax rate expected to apply when the Company’s temporary differences are realized or settled resulted in a revaluation of the Company’s net deferred tax asset of

$2.3

million with a corresponding charge to income tax expense. Based on information available and our current interpretation of the Tax Act, the Company has made reasonable estimates of the impact from the reduction in the corporate tax rate on the remeasurement of applicable deferred tax assets and liabilities. However, certain deferred tax assets and liabilities will continue to be evaluated in the context of the Tax Act through the date of the filing of our

March 31, 2018

federal income tax return, and

may

change as a result of evolving management interpretations, elections, and assumptions, as well as new guidance that

may

be issued by the Internal Revenue Service. Management expects to complete its analysis within the measurement period in accordance with SAB

118.

The Company’s tax returns are subject to review and examination by federal and state taxing authorities. The Company’s tax returns are currently open to audit under the applicable statutes of limitations by the Internal Revenue Service for the years ended

March 31, 2015

through

March 31, 2017.

Years in which an NOL is created though are still open for examination. The establishment of a valuation allowance on our deferred tax assets for financial reporting purposes does

not

affect how the net operating loss carryforwards

may

be utilized on our subsequent income tax returns. The Company does

not

have any uncertain tax positions that are deemed material, and did

not

recognize any adjustments for unrecognized tax benefits.