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INCOME TAXES | 12 Months Ended
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Sep. 30, 2017
Income Tax Disclosure [Abstract] |
INCOME TAXES | NOTE L - INCOME TAXES The income tax expense is comprised of the following components for the years ended September 30, 2017 and 2016:
|  | September 30, |
|  | 2017 |  |  | 2016 |
|  | (In thousands) |
Current |  | $ | (3 | ) |  | $ | 59 |
Deferred |  |  | 997 |  |  |  | 605 |
Total income tax expense |  | $ | 994 |  |  | $ | 664 |
A reconciliation of income tax at the statutory tax rate to the effective income tax expense for the years ended September 30, 2017 and 2016 is as follows:
|  | September 30, |
|  | 2017 |  |  | 2016 |
|  | (In thousands) |
Income tax expense at statutory rate |  | $ | 822 |  |  | $ | 596 |
Increase (decrease) resulting from: |  |  |  |  |  |  |  |
State income taxes, net of federal income tax benefit |  |  | 141 |  |  |  | 161 |
Tax-exempt income, net |  |  | (95 | ) |  |  | (96 | )
Nondeductible expenses |  |  | 4 |  |  |  | 5 |
Employee stock ownership plan |  |  | 7 |  |  |  | (3 | )
Increase (decrease) in valuation allowance |  |  | 115 |  |  |  | — |
Other, net |  |  | — |  |  |  | 1 |
Total income tax expense |  | $ | 994 |  |  | $ | 664 |
The major sources of temporary differences and their deferred tax effect at September 30, 2017 and 2016 are as follows:
|  | September 30, |
|  | 2017 |  |  | 2016 |
|  | (In thousands) |
Allowance for loan losses |  | $ | 1,388 |  |  | $ | 1,221 |
Deferred loan fees |  |  | 1 |  |  |  | 93 |
Employee benefits |  |  | — |  |  |  | 82 |
Net operating losses |  |  | 431 |  |  |  | 1,670 |
Alternative minimum tax credit |  |  | 311 |  |  |  | 252 |
Unrealized loss, minimum pension liability |  |  | 597 |  |  |  | 793 |
Net unrealized loss, investment securities available-for-sale |  |  | 61 |  |  |  | — |
OREO |  |  | 382 |  |  |  | 317 |
Straight line rent |  |  | 177 |  |  |  | 178 |
Gross deferred tax asset |  |  | 3,348 |  |  |  | 4,606 |
Depreciation |  |  | (1,370 | ) |  |  | (1,443 | )
Discount accretion on investments |  |  | (119 | ) |  |  | (118 | )
Employee benefits |  |  | (39 | ) |  |  | — |
Net unrealized gain, investment securities available-for-sale |  |  | — |  |  |  | (18 | )
Mortgage servicing rights |  |  | (28 | ) |  |  | (39 | )
Gross deferred tax liability |  |  | (1,556 | ) |  |  | (1,618 | )
Net deferred tax asset |  |  | 1,792 |  |  |  | 2,988 |
Valuation allowance |  |  | — |  |  |  | (83 | )
Net deferred tax asset, included in other assets |  | $ | 1,792 |  |  | $ | 2,905 |
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible and carry forwards are available. Due to the uncertainty of the Company's ability to realize the benefit of certain deferred tax assets within statutory time limits, the net deferred tax assets were partially offset by a valuation allowance at September 30, 2016. The net change in the valuation allowance for the year ended September 30, 2017 was a decrease of approximately $83,000. This change was based upon management’s assessment of current and projected future operations. The Company has considered future market growth, forecasted earnings, future taxable income, feasible and permissible tax planning strategies in determining the realizability of deferred tax assets. If the Company was to determine that it would not be able to realize a portion of its net deferred tax asset in the future for which there is currently no valuation allowance, an adjustment to the net deferred tax asset would be charged to earnings in the period such determination was made. Conversely, if the Company was to make a determination that it is more likely than not that the deferred tax assets for which there is a valuation allowance would be realized, the related valuation allowance would be reduced and a benefit to earnings would be recorded. At September 30, 2017 the Company had approximately $931,000 of federal and $1.9 million of state net operating losses carry forward available to offset future taxable income for tax reporting purposes. The federal and state net operating loss carry forward will begin to expire in 2029. At September 30, 2017, there was no valuation allowance against the Federal and State net operating loss carry forwards. In determining whether or not a valuation allowance was necessary for its federal and state net operating losses, the Company considered forecasted earnings, future taxable income, and tax planning strategies limited to the twelve months following September 30, 2017. Prior to 1996, savings banks that met certain definitions, tests and other conditions prescribed by the Internal Revenue Code were allowed to deduct, with limitations, a bad debt deduction computed as a percentage of taxable income before such deduction. Currently, the Company employs the direct charge-off method to account for bad debt. The company was required to switch from the reserve method because it now qualifies as a Large Bank as defined under Code Section 585, and is precluded from further using the reserve method. The Company is not required to provide a deferred tax liability for its tax loss reserve as of December 31, 1987 (the Base Year). The amount of this reserve on which no deferred taxes have been provided is approximately $1,258,000. This reserve could be recognized as taxable income and create a current and/or deferred tax liability using the income tax rates then in effect if one of the following occur: (1) the Company’s retained earnings represented by this reserve is used for purposes other than to absorb losses from bad debts, including dividends or distributions in liquidation, (2) the Company fails to meet the definitions, tests, or other conditions provided by the Internal Revenue Code for a qualified savings and loan association, or (3) there is a change in the Federal tax law. Deferred tax liabilities have been recorded for tax loss reserves in excess of book reserves recorded after the Base Year.

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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 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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