INCOME TAXES

12 Months Ended

Jun. 30, 2022

INCOME TAXES

INCOME TAXES

14.     INCOME TAXES

The components of income tax expense were as follows (dollars in thousands):

	For the Years Ended
	June 30,
	2022		2021
Current tax expense	$	2,351	$	2,785
Deferred tax (benefit) expense		708		(1,202)
Total income tax expense	$	3,059	$	1,583

Income tax expense differs from the amount expected based on the federal income tax statutory rate due to the following (dollars in thousands):

	June 30,
	2022				2021
	Amount		Rate		Amount		Rate
Income before tax at the federal tax rate	$	2,801	21.0	%	$	558	21.0	%
State expense, net of federal benefit		359	2.7	%		139	5.2	%
Non-deductible expenses		—	—	%		945	35.5	%
Tax-exempt income		(115)	(0.9)	%		(88)	(3.3)	%
Bank-owned life insurance		10	0.1	%		6	0.2	%
Other, net		4	—	%		23	0.9	%
Total income tax expense	$	3,059	22.9	%	$	1,583	59.5	%

The tax effects that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below (dollars in thousands):

	June 30,		June 30,
	2022		2021
Deferred tax assets
Allowance for loan losses	$	6,481	$	7,393
Net operating loss carryforward		217		—
OTTI – securities		334		334
Post-retirement benefit obligations		493		486
Unrealized losses on securities available for sale		3,847		—
Deferred compensation		253		269
Unfunded defined benefit and postretirement benefit plan liabilities		109		1,872
Contribution carryforward		453		802
Other		696		733
Total deferred tax assets		12,883		11,889
Deferred tax liabilities
Depreciation		(2,053)		(2,329)
Net deferred loan origination costs		(527)		(506)
Prepaid pension		(2,604)		(2,800)
Prepaid expenses		(220)		(141)
Unrealized gains on securities available for sale		—		(58)
Other		(835)		(845)
Total deferred tax liabilities		(6,239)		(6,679)
Net deferred tax asset at end of year	$	6,644	$	5,210

Net deferred tax assets are included in other assets in the consolidated statement of condition.

Management determines the need for a deferred tax valuation allowance based upon the realizability of tax benefits from the reversal of temporary differences creating the deferred tax assets, as well as the amount of available open tax carrybacks, if any. As of June 30, 2022, and 2021, no valuation allowance was required.

For the years ending June 30, 2022 and 2021, there were no amounts accrued and/or paid for interest and penalties.

As a thrift institution, the Company is subject to special provisions in the Federal income tax laws regarding its allowable bad debt deduction and related tax basis bad debt reserves. Deferred income tax liabilities are to be recognized with respect to any base-year reserves which are to become taxable (or “recaptured”) in the foreseeable future.

Under current income tax laws, the base-year reserves would be subject to recapture if the Company pays a cash dividend in excess of earnings and profits or liquidates. The Company does not expect to take any actions in the foreseeable future that would require the recapture of any base-year reserves.

A deferred tax liability has not been recognized with respect to the Federal base-year reserve of $9.3 million at June 30, 2022 and 2021, because the Company does not expect that this amount will become taxable in the foreseeable future. The unrecognized deferred tax liability with respect to the Federal base-year reserve was $2.4 million at June 30, 2022 and 2021. It is more likely than not that this liability will never be incurred because, as noted above, the Company does not expect to take any action in the future that would result in this liability being incurred.

The Company is subject to routine audits of its tax returns by the Internal Revenue Service and New York State Department of Taxation and Finance. The Company is no longer subject to examination by either taxing authority for years before calendar 2018.