INCOME TAXES (Tables)

12 Months Ended

Sep. 30, 2017

The Company and its subsidiaries file a consolidated federal income tax return on a fiscal year basis. The provision for income taxes for the years presented below consisted of the following:



Years ended September 30,	2017			2016			2015
	(Dollars in Thousands)
Federal:
Current	$	12,153		$	4,410		$	4,217
Deferred	(5,040		)	(440		)	(3,896		)
	7,113			3,970			321

State:
Current	4,366			1,422			1,048
Deferred	(1,246		)	210			(1		)
	3,120			1,632			1,047

Income tax expense	$	10,233		$	5,602		$	1,368

Reconciliation of Total Income Tax Expense

Total income tax expense differs from the statutory federal income tax rate as follows:



Years ended September 30,	2017			2016			2015
	(Dollars in Thousands)

Income tax expense at federal tax rate	$	19,303		$	13,588		$	6,798
Increase (decrease) resulting from:
State income taxes net of federal benefit	2,014			933			692
Nontaxable buildup in cash surrender value	(776		)	(580		)	(711		)
Stock based compensation	(593		)	(66		)	(37		)
Tax exempt income	(9,991		)	(8,257		)	(5,230		)
Nondeductible expenses	316			196			188
Other, net	(40		)	(212		)	(332		)
Total income tax expense	$	10,233		$	5,602		$	1,368

Components of Net Deferred Tax Asset (Liability)

The components of the net deferred tax asset (liability) at September 30, 2017 and 2016 were:



September 30,	2017			2016
	(Dollars in Thousands)
Deferred tax assets:
Bad debts	$	2,832		$	2,044
Deferred compensation	1,548			1,345
Stock based compensation	3,436			265
Operational reserve	645			540
AMT Credit	1,869			5,563
Intangibles	5,235			393
Indirect tax benefits of unrecognized tax positions	266			216
Other assets	1,933			1,362
	17,764			11,728

Deferred tax liabilities:
FHLB stock dividend	(425		)	(411		)
Premises and equipment	(1,789		)	(1,913		)
Patents	(842		)	(988		)
Prepaid expenses	(673		)	(668		)
Net unrealized gains on securities available for sale	(4,934		)	(12,348		)
	(8,663		)	(16,328		)

Net deferred tax assets (liabilities)	$	9,101		$	(4,600	)

Reconciliation of Liabilities Associated with Unrecognized Tax Benefits

A reconciliation of the beginning and ending balances for liabilities associated with unrecognized tax benefits for the years ended September 30, 2017, and 2016 follows:



September 30,	2017			2016
	(Dollars in Thousands)
Balance at beginning of year	$	525		$	974
Additions for tax positions related to the current year	192			63
Additions for tax positions related to the prior years	31			—
Reductions for tax positions due to settlement with taxing authorities	—			(372		)
Reductions for tax positions related to prior years	(103		)	(140		)
Balance at end of year	$	645		$	525