Note 8: Income Taxes

3 Months Ended

Dec. 31, 2015

The Company and its subsidiary files income tax returns in the U.S. Federal jurisdiction and various states. The Company is no longer subject to U.S. federal and state examinations by tax authorities for fiscal years before 2011. The Company recognized no interest or penalties related to income taxes.

The Company’s income tax provision is comprised of the following components:

	For the three months ended		For the six months ended
(dollars in thousands)	December 31, 2015	December 31, 2014	December 31, 2015	December 31, 2014
Income taxes
Current	$1,921	$2,101	$4,125	$3,465
Deferred	(101)	(641)	(640)	(624)
Total income tax provision	$1,820	$1,460	$3,485	$2,841

The components of net deferred tax assets are summarized as follows:

(dollars in thousands)	December 31, 2015	June 30, 2015
Deferred tax assets:
Provision for losses on loans	$4,449	$5,037
Accrued compensation and benefits	782	538
Other-than-temporary impairment on available for sale securities	142	137
NOL carry forwards acquired	910	768
Minimum Tax Credit	130	130
Unrealized loss on other real estate	107	6
Other	637	319
Total deferred tax assets	7,157	6,935

Deferred tax liabilities:
Purchase accounting adjustments	1,041	1,985
Depreciation	1,202	992
FHLB stock dividends	194	39
Prepaid expenses	243	81
Unrealized gain on available for sale securities	516	502
Total deferred tax liabilities	3,196	3,599

Net deferred tax asset	$3,961	$3,336

As of December 31 and June 30, 2015, the Company had approximately $1.8 and $3.9 million in federal and state net operating loss carryforwards, which were acquired in the July 2009 acquisition of Southern Bank of Commerce, the February 2014 acquisition of Citizens State Bankshares of Bald Knob, Inc. and the August 2014 acquisition of Peoples Service Company. The amount reported is net of the IRC Sec. 382 limitation, or state equivalent, related to utilization of net operating loss carryforwards of acquired corporations. Unless otherwise utilized, the net operating losses will begin to expire in 2027.

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax is shown below:

	For the three months ended		For the six months ended
(dollars in thousands)	December 31, 2015	December 31, 2014	December 31, 2015	December 31, 2014
Tax at statutory rate	$2,109	$1,665	$3,965	$3,256
Increase (reduction) in taxes resulting from:
Nontaxable municipal income	(145)	(134)	(279)	(265)
State tax, net of Federal benefit	163	127	317	247
Cash surrender value of Bank-owned life insurance	(163)	(49)	(208)	(98)
Tax credit benefits	(63)	(91)	(125)	(181)
Other, net	(82)	(59)	(185)	(118)
Actual provision	$1,820	$1,460	$3,485	$2,841

Tax credit benefits are recognized under the flow-through method of accounting for investments in tax credits.