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INCOME TAXES | 12 Months Ended
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Sep. 30, 2014
INCOME TAXES [Abstract] |
INCOME TAXES | NOTE 13. INCOME TAXES The Company and its subsidiaries file a consolidated federal income tax return on a fiscal year basis. The provision for income taxes consists of:
Years ended September 30, |  | 2014 |  |  | 2013 |  |  | 2012 |
|  | (Dollars in Thousands) |
Federal: |  |  |  |  |  |  |  |  |
Current |  | $ | 3,787 |  |  | $ | 2,847 |  |  | $ | 7,734 |
Deferred |  |  | (1,765 | ) |  |  | (536 | ) |  |  | 858 |
|  |  | 2,022 |  |  |  | 2,311 |  |  |  | 8,592 |
State: |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | 874 |  |  |  | 1,252 |  |  |  | 960 |
Deferred |  |  | 10 |  |  |  | 141 |  |  |  | 130 |
|  |  | 884 |  |  |  | 1,393 |  |  |  | 1,090 |
Income tax expense |  | $ | 2,906 |  |  | $ | 3,704 |  |  | $ | 9,682 |
Total income tax expense differs from the statutory federal income tax rate as follows:
Years ended September 30, |  | 2014 |  |  | 2013 |  |  | 2012 |
|  | (Dollars in Thousands) |
Income tax expense at federal tax rate |  | $ | 6,517 |  |  | $ | 5,993 |  |  | $ | 9,378 |
Increase (decrease) resulting from: |  |  |  |  |  |  |  |  |  |  |  |
State income taxes net of federal benefit |  |  | 575 |  |  |  | 1,092 |  |  |  | 708 |
Nontaxable buildup in cash surrender value |  |  | (399 | ) |  |  | (349 | ) |  |  | (179 | )
Incentive stock option expense |  |  | (187 | ) |  |  | (97 | ) |  |  | 10 |
Tax exempt income |  |  | (3,594 | ) |  |  | (2,815 | ) |  |  | (244 | )
Nondeductible expenses |  |  | 120 |  |  |  | 41 |  |  |  | 37 |
Other, net |  |  | (126 | ) |  |  | (161 | ) |  |  | (28 | )
Total income tax expense (benefit) |  | $ | 2,906 |  |  | $ | 3,704 |  |  | $ | 9,682 |
The components of the net deferred tax asset (liability) at September 30, 2014 and 2013 are:
September 30, |  | 2014 |  |  | 2013 |
|  | (Dollars in Thousands) |
Deferred tax assets: |  |  |  |  |  |
Bad debts |  | $ | 1,955 |  |  | $ | 1,426 |
Deferred compensation |  |  | 708 |  |  |  | 446 |
Stock based compensation |  |  | 271 |  |  |  | 293 |
Operational reserve |  |  | 464 |  |  |  | 494 |
AMT Credit |  |  | 2,239 |  |  |  | 1,113 |
Net unrealized losses on securities available for sale |  |  | 2,969 |  |  |  | 12,776 |
Indirect tax benefits of unrecognized tax positions |  |  | 376 |  |  |  | - |
Other assets |  |  | 759 |  |  |  | 1,157 |
|  |  | 9,741 |  |  |  | 17,705 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
FHLB stock dividend |  |  | (410 | ) |  |  | (411 | )
Premises and equipment |  |  | (1,060 | ) |  |  | (1,366 | )
Patents |  |  | (937 | ) |  |  | (849 | )
Prepaid expenses |  |  | (743 | ) |  |  | (782 | )
|  |  | (3,150 | ) |  |  | (3,408 | )
Net deferred tax assets (liabilities) |  | $ | 6,591 |  |  | $ | 14,297 |
As of September 30, 2014 and 2013, the Company had a gross deferred tax asset of $780,000 and $704,000, respectively, for state cumulative net operating loss carryforwards, which was fully reserved for as the Company does not anticipate any state taxable income at the holding company level in future periods. Federal income tax laws provided savings banks with additional bad debt deductions through September 30, 1987, totaling $6.7 million for the Bank. Accounting standards do not require a deferred tax liability to be recorded on this amount, which liability otherwise would total approximately $2.3 million at September 30, 2014, and 2013. If the Bank were to be liquidated or otherwise cease to be a bank, or if tax laws were to change, the $2.3 million would be recorded as expense. The provisions of ASC 740, Income Taxes, address the determination of how tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements. Under ASC 740, the Company recognizes the tax benefits from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination, with a tax examination being presumed to occur, including the resolution of any related appeals or litigation. The tax benefits recognized in the consolidated financial statements from such a position are measured as the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. The Company’s tax reserves reflect management’s judgment as to the resolution of the issues involved if subject to judicial review. While the Company believes that its reserves are adequate to cover reasonably expected tax risks, there can be no assurance that, in all instances, an issue raised by a tax authority will be resolved at a financial cost that does not exceed its related reserve. With respect to these reserves, the Company’s income tax expense would include (i) any changes in tax reserves arising from material changes during the period in the facts and circumstances surrounding a tax issue, and (ii) any difference from the Company’s tax position as recorded in the consolidated financial statements and the final resolution of a tax issue during the period The tax years ended September 30, 2011, and later remain subject to examination by the Internal Revenue Service. For state purposes, the tax years ended September 30, 2011, and later remain open for examination, with few exceptions. A federal income tax review is currently underway with the Internal Revenue Service for the year ended September 30, 2012. The Company does not expect any material adjustments from the review. The Company does not anticipate any significant increase or decrease in unrecognized tax benefits during the next twelve months. Finally, management believes that the realization of its deferred tax assets is more likely than not based on the expectations as to future taxable income; therefore, there was no deferred tax valuation allowance at September 30, 2014 and 2013 with the exception of the state cumulative net operating loss carryforwards discussed above. A reconciliation of the beginning and ending balances for liabilities associated with unrecognized tax benefits for the years ended September 30, 2014 and 2013, follows:
September 30, |  | 2014 |  |  | 2013 |
|  | (Dollars in Thousands) |
Balance at beginning of year |  | $ | 931 |  |  | $ | 164 |
Additions for tax positions related to the current year |  |  | 118 |  |  |  | 114 |
Additions for tax positions related to the prior years |  |  | - |  |  |  | 653 |
Reductions for tax positions due to settlement with taxing authorities |  |  | (16 | ) |  |  | - |
Reductions for tax positions related to prior years |  |  | (50 | ) |  |  | - |
Balance at end of year |  | $ | 983 |  |  | $ | 931 |
The total amount of unrecognized tax benefits that, if recognized, would impact the effective rate was $649,000 as of September 30, 2014. The Company recognizes interest related to unrecognized tax benefits as a component of income tax expense. The amount of accrued interest related to unrecognized tax benefits was $124,000 as of September 30, 2014. The Company does not anticipate any significant change in the total amount of unrecognized tax benefits within the next 12 months.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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