Federal Taxes on Income

The provision (benefit) for income taxes for the periods shown is summarized as follows:



	For the Year Ended December 31,
	2019		2018
	(In thousands)
Current	$	1,764	$	1,927
Deferred	313		(352		)
	$	2,077	$	1,575

A reconciliation of the tax provision (benefit) based on statutory corporate tax rates, estimated to be 21% for the year ended December 31, 2019, on pre-tax income and the provision (benefit) shown in the accompanying consolidated statements of income for the periods shown is summarized as follows:



	For the Year Ended December 31,
	2019			2018
	(In thousands)
Income taxes computed at statutory rates	$	2,329		$	1,823
Tax-exempt income	(83		)	(84		)
Bank-owned life insurance income	(149		)	(125		)
Deferred tax asset valuation allowance	(1,224		)	(1		)
Expiration of contribution carryforward	1,224			—
Other, net	(20		)	(38		)
	$	2,077		$	1,575

As a result of the bad debt deductions taken in years prior to 1988, retained earnings include accumulated earnings of approximately $6.4 million, on which federal income taxes have not been provided. If, in the future, this portion of retained earnings is used for any purpose other than to absorb losses on loans or on property acquired through foreclosure, federal income taxes may be imposed at the then-prevailing corporate tax rates. The Company does not contemplate that such amounts will be used for any purpose that would create a federal income tax liability; therefore, no provision has been made.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. These calculations are based on many complex factors including estimates of the timing of reversals of temporary differences, the interpretation of federal income tax laws, and a determination of the differences between the tax and the financial reporting basis of assets and liabilities. Actual results could differ significantly from the estimates and interpretations used in determining the current and deferred income tax assets and liabilities.

During the year ended June 30, 2015, the Company contributed $400,000 in cash and $9.3 million in common stock to the Foundation. Under current Federal income tax regulations, charitable contribution deductions are limited to 10% of taxable income. Accordingly, the $9.7 million contribution created a carryforward for income tax purposes with a deferred tax asset of $3.3 million and related valuation allowance of $1.9 million for financial statement reporting purposes. At December 31, 2019, the balance of the contribution carryforward totaled $5.9 million. The contribution carryforward expired in 2019. As a result, the carryforward and related valuation allowance were reversed during the period. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company evaluates whether its deferred tax assets will be realized and adjusts the amount of its valuation allowance, if necessary. There was a valuation allowance of $0 and $1.2 million, at December 31, 2019 and 2018, respectively.

The Company applies the provisions of FASB ASC 740 that require the application of a more-likely-than-not recognition criterion for the reporting of uncertain tax positions on its financial statements. The Company had no unrecognized tax assets at December 31, 2019 and 2018. During the years ended December 31, 2019 and 2018, the Company recognized no interest and penalties. The Company recognizes interest and penalties in income tax expense. The Company files income tax returns in the U.S. federal jurisdiction and is no longer subject to U.S. federal income tax examinations by tax authorities for years ending before June 30, 2016.

The components of net deferred tax assets and liabilities at the periods shown are summarized as follows:



	December 31, 2019		December 31, 2018
	(In thousands)
Deferred tax assets
Allowance for loan losses	$	2,064	$	2,049
Unrealized loss on securities available for sale	409		1,264
Accrued compensation	487		397
Nonaccrual loans	6		4
ESOP timing differences	143		195
Restricted stock awards	107		134
Contribution carryforward	—		1,515
Deferred lease liability	768		—
Total deferred tax assets	3,984		5,558

Deferred tax liabilities
Deferred loan fees	443		436
FHLB stock dividends	425		488
Accumulated depreciation	691		734
Deferred investment gain	34		14
Right of use asset	745		—
Other, net	175		23
Total deferred tax liabilities	2,513		1,695
Deferred tax asset, net	1,471		3,863

Deferred tax asset valuation allowance	—		(1,224		)

Deferred tax asset, net of valuation allowance	$	1,471	$	2,639