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INCOME TAXES
 12 Months Ended
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)202520242023
Federal:
Current$10,407 $9,770 $8,792 
Deferred15,754 13,276 (6,688)
26,161 23,046 2,104 
State:   
Current9,060 8,172 7,935 
Deferred1,045 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, 2025September 30, 2024
Deferred tax assets:
Allowance for credit losses$12,938 $17,647 
Deferred compensation4,511 4,351 
Stock based compensation2,084 2,402 
Valuation adjustments78 175 
General business credits(1)
49,070 55,471 
Accrued expenses2,807 2,763 
Lease liability5,930 6,503 
Net unrealized loss on securities available for sale47,167 50,819 
Premises and equipment4,998 3,939 
Deferred income2,386 — 
Other assets2,276 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,
202520242023
(Dollars in thousands)AmountRateAmountRateAmountRate
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 benefits7,983 3.6 %8,678 4.0 %5,999 3.9 %
162(m) disallowance1,540 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 redemption3,116 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, 2025September 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.