NOTE 13.

INCOME TAXES

The Company and its subsidiaries file a consolidated federal income tax return on a fiscal year basis. Total income tax expense differs from the statutory federal income tax rate for the nine months ended June 30, 2015 and 2014 as follows:

	Income Tax Expense (Benefit) As Of
	June 30, 2015			June 30, 2014
	(Dollars in Thousands)

Income tax expense at federal tax rate	$	5,229		$	5,197
Increase (decrease) resulting from:
State income taxes net of federal benefit		477			489
Nontaxable buildup in cash surrender value		(444	)		(318	)
Incentive stock option expense		(45	)		(200	)
Tax exempt income		(3,606	)		(2,625	)
Nondeductible expenses		124			82
Other, net		(212	)		(125	)
Total income tax expense (benefit)	$	1,523		$	2,500

The Company’s effective tax rate for the nine months ended June 30, 2015 decreased as compared to the nine months ended June 30, 2014 primarily due to the level of tax exempt income as compared to overall pre-tax income.