Income Taxes

12 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Allocation of federal and state income taxes between current and deferred portions is as follows:

	Years Ended June 30,
	2022			2021
	(Dollars in Thousands)
Current tax provision:
Federal	$	313		$	129
State		42			54
		355			183
Deferred tax expense (benefit):
Federal		(322	)		58
State		(200	)		5
Valuation Allowance		115			-
		(407	)		63
Total income tax provision (benefit)	$	(52	)	$	246

The reasons for the differences between the statutory federal income tax rate and the effective tax rates are summarized as follows:

	Years Ended June 30,
	2022			2021
	(Dollars in Thousands)
Statutory amount	$	82		$	344
Increase (decrease) resulting from:
State taxes, net of federal tax benefit		(120	)		47
Tax exempt interest		(96	)		(114	)
Bank-owned life insurance		(34	)		(35	)
Other, net		1			4
Valuation Allowance		115			-
Effective (benefit) tax	$	(52	)	$	246
Effective tax rate		-13.3	%		15.0	%

The components of the net deferred tax asset are as follows:

	June 30,
	2022			2021
	(Dollars in Thousands)
Deferred tax assets:
Allowance for loan losses	$	466		$	459
Employee benefit plans		328			294
ESOP		14			-
Charitable Contribution carryforward		403			-
		1,211			753
Valuation Allowance		(115	)		-
Gross deferred tax assets		1,096			753
Deferred tax liabilities:
Net unrealized gain on available for sale securities		-			(7	)
Depreciation and amortization		(17	)		(81	)
		(17	)		(88	)
Net deferred tax asset	$	1,079		$	665

A summary of the change in the net deferred tax asset is as follows:

	Years Ended June 30,
	2022		2021
	(Dollars in Thousands)
Balance at beginning of year	$	665	$	732
Deferred tax benefit (expense)		407		(63	)
Deferred tax effects of net unrealized gain on      available for sale securities		7		(4	)
Balance at end of year	$	1,079	$	665

The calculation of the Company's charitable contribution carryforward deferred tax asset is based upon a carryforward of approximately $1,417,000 of charitable contributions at June 30, 2022. As of June 30, 2022 it has been determined that it is more likely than not that a portion of the benefit from this charitable contribution carryforward will not be realized prior to expiration. As a result, a valuation allowance of $115,000 has been provided on this deferred tax asset for the year ended June 30, 2022. There was no valuation allowance for the year ended June 30, 2021. All other deferred tax assets as of June 30, 2022 and 2021 have not been reduced by a valuation allowance because management believes that it is more likely than not that the full amount of these deferred tax assets will be realized.

The federal income tax reserve for loan losses at the Bank’s base year amounted to $2,582,000. If any portion of the reserve is used for purposes other than to absorb loan losses, approximately 150% of the amount actually used, limited to the amount of the reserve, would be subject to taxation in the fiscal year in which used. As the Bank intends to use the reserve only to absorb loan losses, a deferred income tax liability of $726,000 has not been provided.

The Company and the Bank’s income tax returns are subject to review and examination by federal and state taxing authorities. The Bank is currently open to audit under the applicable statues of limitations by the internal revenue service for the years ended December 2019 through 2021. The years open to examination by state taxing authorities vary by jurisdiction; no years prior to 2019 are open.