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INCOME TAXES | 12 Months Ended
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Sep. 30, 2019
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, 2019 and 2018:
|  | September 30, |
|  | 2019 |  |  | 2018 |
|  | (In thousands) |
Income tax expense at the statutory federal tax rate of |  |  |  |  |  |  |  |
21% for the year ended September 30, 2019 and |  |  |  |  |  |  |  |
24% for the year ended September 30, 2018, respectively |  | $ | 895 |  |  | $ | 839 |
State tax expense |  |  | 397 |  |  |  | 240 |
Reduction of deferred tax asset from tax legislation |  |  | — |  |  |  | 410 |
Other |  |  | (27 | ) |  |  | (18 | )
Income tax expense |  | $ | 1,265 |  |  | $ | 1,471 |
A reconciliation of income tax at the statutory tax rate to the effective income tax expense for the years ended September 30, 2019 and 2018 is as follows:
|  | September 30, |
|  | 2019 |  |  | 2018 |
|  | (In thousands) |
Income tax expense at statutory rate |  | $ | 895 |  |  | $ | 839 |
Increase (decrease) resulting from: |  |  |  |  |  |  |  |
State income taxes, net of federal income tax benefit |  |  | 397 |  |  |  | 244 |
Tax-exempt income, net |  |  | (64 | ) |  |  | (70 | )
Nondeductible expenses |  |  | 26 |  |  |  | 32 |
Employee stock ownership plan |  |  | 2 |  |  |  | 5 |
Increase due to change in tax law |  |  | — |  |  |  | 410 |
Other, net |  |  | 9 |  |  |  | 11 |
Total income tax expense |  | $ | 1,265 |  |  | $ | 1,471 |
The major sources of temporary differences and their deferred tax effect at September 30, 2019 and 2018 are as follows:
|  | September 30, |
|  | 2019 |  |  | 2018 |
|  | (In thousands) |
Allowance for loan losses |  | $ | 1,374 |  |  | $ | 1,181 |
Deferred loan fees |  |  | 76 |  |  |  | — |
Unrealized loss, minimum pension liability |  |  | 537 |  |  |  | 363 |
Net unrealized loss, investment securities available-for-sale |  |  | — |  |  |  | 213 |
OREO |  |  | 424 |  |  |  | 410 |
Straight line rent |  |  | 118 |  |  |  | 125 |
Gross deferred tax asset |  |  | 2,529 |  |  |  | 2,292 |
Depreciation |  |  | (931 | ) |  |  | (964 | )
Discount accretion on investments |  |  | (89 | ) |  |  | (87 | )
Employee benefits |  |  | (107 | ) |  |  | (66 | )
Deferred loan fees |  |  | — |  |  |  | (19 | )
Net unrealized gain, investment securities available-for-sale |  |  | (17 | ) |  |  | — |
Mortgage servicing rights |  |  | (7 | ) |  |  | (13 | )
Gross deferred tax liability |  |  | (1,151 | ) |  |  | (1,149 | )
Net deferred tax asset |  |  | 1,378 |  |  |  | 1,143 |
Valuation allowance |  |  | — |  |  |  | — |
Net deferred tax asset, included in other assets |  | $ | 1,378 |  |  | $ | 1,143 |
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. There were no valuation allowances for the year ended September 30, 2019 and 2018. 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. On December 22, 2017, the Company revised its estimated annual effective rate to reflect a change in the United States federal corporate tax rate from 34% to 21%. The rate change was administratively effective to the beginning of our fiscal year resulting in the use of a statutory rate of 21% for the year ended September 30, 2019 and a blended rate of 24% for the year ended September 30, 2018. Included in the income tax expense for the year ended September 30, 2018 was a $410,000 expense for a reduction in the Company’s net deferred tax assets resulting from the impact of the Tax Cuts and Jobs Act. On July 1, 2018, the State of New Jersey's Assembly signed into law a new bill, effective January 1, 2018, that imposed a temporary surtax on corporations earning New Jersey allocated income in excess of $1 million. The surtax was set at a rate of 2.5% for tax years beginning on or after January 1, 2018 through December 31, 2019, and at a rate of 1.5% for years beginning on or after January 1, 2020, through December 31, 2021. Accordingly, the Company is using an 11.5% State tax rate for the calculation of its State income tax expense the year ended September 30, 2019. In addition, effective for periods on or after January 1, 2019, the State of New Jersey is adopting mandatory unitary combined reporting for its Corporation Business Tax. The change is not expected to have a material impact on the Company’s State income tax.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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