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INCOME TAXES | 12 Months Ended
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Sep. 30, 2025
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The Company and its subsidiaries file a consolidated federal income tax return on a fiscal year basis. The provision for income taxes were as follows:
| Fiscal Year Ended September 30,
(Dollars in thousands) | 2025 |  | 2024 |  | 2023
Federal: |  |  |  |  |
Current | $ | 10,407 |  |  | $ | 9,770 |  |  | $ | 8,792 |
Deferred | 15,754 |  |  | 13,276 |  |  | (6,688) |
| 26,161 |  |  | 23,046 |  |  | 2,104 |
State: |  |  |  |  |
Current | 9,060 |  |  | 8,172 |  |  | 7,935 |
Deferred | 1,045 |  |  | 2,890 |  |  | (452) |
| 10,105 |  |  | 11,062 |  |  | 7,483 |
Income tax expense | $ | 36,266 |  |  | $ | 34,108 |  |  | $ | 9,587 |
The tax effects of the Company's temporary differences that give rise to significant portions of its deferred tax assets and liabilities were:
(Dollars in thousands) | September 30, 2025 |  | September 30, 2024
Deferred tax assets: |  |  |
Allowance for credit losses | $ | 12,938 |  |  | $ | 17,647 |
Deferred compensation | 4,511 |  |  | 4,351 |
Stock based compensation | 2,084 |  |  | 2,402 |
Valuation adjustments | 78 |  |  | 175 |
General business credits(1) | 49,070 |  |  | 55,471 |
Accrued expenses | 2,807 |  |  | 2,763 |
Lease liability | 5,930 |  |  | 6,503 |
Net unrealized loss on securities available for sale | 47,167 |  |  | 50,819 |
Premises and equipment | 4,998 |  |  | 3,939 |
Deferred income | 2,386 |  |  | — |
Other assets | 2,276 |  |  | 3,940 |
| 134,245 |  |  | 148,010 |
Deferred tax liabilities: |  |  |
Intangibles | (8,366) |  |  | (7,859) |
Leased assets | (80,012) |  |  | (76,016) |
Right-of-use assets | (5,678) |  |  | (6,218) |
Life insurance redemption | (3,493) |  |  | — |
Other liabilities | (466) |  |  | (1,346) |
| (98,015) |  |  | (91,439) |
Net deferred tax assets | $ | 36,230 |  |  | $ | 56,571 |
(1) The general business credits are investment tax credits generated from qualified solar energy property placed in service during the fiscal years ended September 30, 2025 and 2024. These credits will begin to expire on September 30, 2041. As of September 30, 2025, the Company had a gross deferred tax asset of $3.6 million for separate company state cumulative net operating loss carryforwards, for which $3.6 million was reserved. At September 30, 2024, the Company had a gross deferred tax asset of $3.0 million for separate company state cumulative net operating loss carryforwards, for which $3.0 million was reserved. These state operating loss carryforwards will expire in various subsequent periods. In general, 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, 2025, or 2024 with the exception of the state cumulative net operating loss carryforwards discussed above. The table below reconciles the statutory federal income tax expense and rate to the effective income tax expense and rate for the fiscal years presented. The Company's effective tax rate is calculated by dividing income tax expense by income before income tax expense.
| Fiscal Year Ended September 30,
| 2025 |  | 2024 |  | 2023
(Dollars in thousands) | Amount | Rate |  | Amount | Rate |  | Amount | Rate
Statutory federal income tax expense and rate | $ | 46,841 |  | 21.0 | % |  | $ | 45,910 |  | 21.0 | % |  | $ | 32,559 |  | 21.0 | %
Change in tax rate resulting from: |  |  |  |  |  |  |  |
State income taxes net of federal benefits | 7,983 |  | 3.6 | % |  | 8,678 |  | 4.0 | % |  | 5,999 |  | 3.9 | %
162(m) disallowance | 1,540 |  | 0.7 | % |  | 1,874 |  | 0.9 | % |  | 919 |  | 0.6 | %
Tax exempt income | (636) |  | (0.3) | % |  | (690) |  | (0.3) | % |  | (783) |  | (0.5) | %
General business credits | (20,773) |  | (9.3) | % |  | (21,132) |  | (9.7) | % |  | (28,633) |  | (18.5) | %
Life insurance redemption | 3,116 |  | 1.4 | % |  | — |  | — | % |  | — |  | — | %
Other, net | (1,805) |  | (0.8) | % |  | (532) |  | (0.2) | % |  | (474) |  | (0.3) | %
Income tax expense | $ | 36,266 |  | 16.3 | % |  | $ | 34,108 |  | 15.7 | % |  | $ | 9,587 |  | 6.2 | %
The Company uses the flow through method of accounting for investment tax credits under which the credits are recognized as a reduction to income tax expense in the period in which the credit arises. During the fiscal years ended September 30, 2025, 2024, and 2023, $19.7 million, $19.7 million, and $27.4 million in investment tax credits were recognized as a reduction to income tax expense, respectively. 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, 2022 and later remain subject to examination by the Internal Revenue Service. For state purposes, the tax years ended September 30, 2022 and later remain open for examination, with few exceptions. A reconciliation of the beginning and ending balances for liabilities associated with unrecognized tax benefits follows:
(Dollars in thousands) | September 30, 2025 |  | September 30, 2024
Balance at beginning of fiscal year | $ | 577 |  |  | $ | 521 |
Additions (reductions) for tax positions related to prior years | (78) |  |  | 56 |
Balance at end of fiscal year | $ | 499 |  |  | $ | 577 |
The total amount of unrecognized tax benefits that, if recognized, would impact the effective rate was $499,000 as of September 30, 2025. 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 $57,000 as of September 30, 2025. 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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