INCOME TAXES

12 Months Ended

Mar. 31, 2019

13.	INCOME TAXES

Provision for income taxes consisted of the following for the periods indicated (in thousands):

	Year Ended March 31
	2019			2018		2017
Current	$	5,157		$	4,087	$	284
Deferred		(11	)		3,668		3,103
Total	$	5,146		$	7,755	$	3,387

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are as follows at the dates indicated (in thousands):

	March 31, 2019		March 31, 2018
Deferred tax assets:
Deferred compensation	$	45	$	77
Allowance for loan losses		2,862		2,643
Accrued expenses		131		127
Accumulated depreciation and amortization		797		753
Deferred gain on sale		167		201
Purchase accounting		141		150
Net unrealized loss on investment securities available for sale		829		1,458
Other		242		236
Total deferred tax assets		5,214		5,645

Deferred tax liabilities:
FHLB stock dividend		(97	)		(95	)
Prepaid expenses		(148	)		(109	)
Loan fees/costs		(774	)		(628	)
Total deferred tax liabilities		(1,019	)		(832	)
Deferred tax assets, net	$	4,195		$	4,813

A reconciliation of the Company's effective income tax rate with the federal statutory tax rate is as follows for the years indicated:

	Year Ended March 31,
	2019		2018		2017
Statutory federal income tax rate	21.0	%	30.8	%	34.0	%
State and local income tax rate	3.0		2.5		1.5
Revaluation of net deferred tax assets due to Tax Act	-		11.4		-
ESOP market value adjustment	(0.1)		-		(0.1	)
BOLI	(0.8)		(1.5	)	(3.8	)
Other, net	(0.1)		(0.1	)	(0.2	)
Effective federal income tax rate	23.0	%	43.1	%	31.4	%

On December 22, 2017, the federal government enacted the Tax Act. The Tax Act made significant changes to the U.S. tax law including, among other things: a reduction in the federal corporate income tax rate from a maximum of 35.0% to 21.0%

effective January 1, 2018; changes to the tax treatment of net operating loss carryforwards and carrybacks; and a repeal of the corporate alternative minimum tax. The Tax Act reduced the Company's federal corporate income tax rate from 34.0% to a blended federal corporate income tax rate of 30.8% for the fiscal year ended March 31, 2018. As a result of using a blended tax rate, the Company recognized a $422,000 benefit for income taxes during the quarter ended December 31, 2017. Also as a result of the Tax Act, the reduction of the corporate tax rate required the Company to remeasure its deferred tax assets and liabilities based upon the lower federal tax rate. Accordingly, during the year ended March 31, 2018, the Company recorded a one-time $2.1 million charge to the provision for income taxes in conjunction with remeasuring its net deferred tax asset to account for the future impact of the decrease in the federal corporate income tax rate. In addition, the Company has made an adjustment between retained earnings and AOCI related to the stranded tax effects due to the change in the federal corporate tax rate applied to the net unrealized losses on available for sale investment securities (see discussion of ASU 2018-02 in Note 1). Beginning in fiscal year 2019, the Company utilized a federal corporate income tax rate of 21.0%.

The Bank's retained earnings at both March 31, 2019 and 2018 include a base year allowance for loan losses, which amounted to $2.2 million, for which no federal income tax liability has been recognized. The related unrecognized deferred tax liability at both March 31, 2019 and 2018 was $517,000. This represents the balance of the allowance for loan losses created for tax purposes as of December 31, 1987. These amounts are subject to recapture in the unlikely event that the Company's banking subsidiaries (1) make distributions in excess of current and accumulated earnings and profits, as calculated for federal tax purposes, (2) redeem their stock, or (3) liquidate. Management does not expect this temporary difference to reverse in the foreseeable future.

At March 31, 2019 and 2018, the Company had no unrecognized tax benefits or uncertain tax positions. In addition, the Company had no accrued interest or penalties related to income tax matters as of March 31, 2019 or 2018. It is the Company's policy to recognize potential accrued interest and penalties related to income tax matters as a component of provision for income taxes. The Company is subject to U.S. federal and State of Oregon income taxes. The years 2016 to 2019 remain open to examination for federal income taxes, and the years 2015 to 2019 remain open to State of Oregon examination.