Note 8: Income Taxes

3 Months Ended

Sep. 30, 2020

Notes

Note 8: Income Taxes

Note 8: Income Taxes   

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 federal and state examinations by tax authorities for tax years ending June 30, 2015 and before.  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-month periods ended
(dollars in thousands)	09/30/2020	September 30, 2019
Income taxes
Current	$                      4,750	$                      1,970
Deferred	(2,003)	6
Total income tax provision	$                      2,747	$                      1,976

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

(dollars in thousands)	September 30, 2020	June 30, 2020
Deferred tax assets:
Provision for losses on loans	$                      8,023	$                      5,802
Accrued compensation and benefits	539	825
NOL carry forwards acquired	136	149
Minimum Tax Credit	130	130
Unrealized loss on other real estate	187	257
Other	120	26
Total deferred tax assets	9,135	7,189
Deferred tax liabilities:
Purchase accounting adjustments	42	64
Depreciation	1,785	1,665
FHLB stock dividends	120	120
Prepaid expenses	208	259
Unrealized gain on available for sale securities	1,304	1,265
Other	-	104
Total deferred tax liabilities	3,459	3,477
Net deferred tax asset	$                      5,676	$                      3,712

As of September 30, 2020, the Company had approximately $675,000 and $119,000 in federal and state net operating loss carryforwards, respectively, 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., the August 2014 acquisition of Peoples Service Company, and the June 2017 acquisition of Tammcorp, Inc.  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 expense is shown below:

	For the three-month periods ended
(dollars in thousands)	September 30, 2020	September 30, 2019
Tax at statutory rate	$                      2,674	$                      2,059
Increase (reduction) in taxes      resulting from:
Nontaxable municipal income	(103)	(113)
State tax, net of Federal benefit	241	109
Cash surrender value of                  Bank-owned life insurance	(59)	(53)
Tax credit benefits	26	-
Other, net	(32)	(26)
Actual provision	$                      2,747	$                      1,976

For the three month periods ended September 30, 2020 and 2019, income tax expense at the statutory rate was calculated using a 21% annual effective tax rate (AETR).  

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