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INCOME TAXES
 12 Months Ended
Sep. 30, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE L - INCOME TAXES

The Company’s income tax expense is comprised of the following components for the years ended September 30, 2022 and 2021:

For the Year Ended

September 30,

2022

2021

(In thousands)

Current

$

3,163

$

2,718

Deferred

87

(113)

Total income tax expense

$

3,250

$

2,605

A reconciliation of income tax at the statutory tax rate to the effective income tax expense for the years ended September 30, 2022 and 2021 is as follows:

September 30,

2022

2021

(In thousands)

 

Income tax expense at statutory rate

$

2,339

$

1,832

Increase (decrease) resulting from:

State income taxes, net of federal income tax benefit

922

772

Tax-exempt income, net

(87

)

(68

)

Nondeductible expenses

37

26

Employee stock ownership plan

3

1

Other, net

36

42

Total income tax expense

$

3,250

$

2,605

The major sources of temporary differences and their deferred tax effect at September 30, 2022 and 2021 are as follows:

September 30,

2022

2021

(In thousands)

 

Allowance for loan losses

$

2,369

$

2,270

Deferred loan fees

244

416

Unrealized loss, minimum pension liability

288

351

OREO

—

123

Straight line rent

88

101

Gross deferred tax asset

2,989

3,261

 

Depreciation

(816

)

(874

)

Employee benefits

(122

)

(183

)

Mortgage servicing rights

—

(1

)

Gross deferred tax liability

(938

)

(1,058

)

Net deferred tax asset, included in other assets

$

2,051

$

2,203

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, 2022 and 2021. 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.

The Bank’s statutory income tax rate in the State of New Jersey was 9.0% for the years ending September 30, 2022 and 2021. The State of New Jersey imposed a temporary surtax on corporations earning New Jersey allocated income in excess of $1 million. The surtax is set at a rate of 2.5% and it currently effective through December 31, 2023. Accordingly, the Company used an 11.5% State tax rate for the calculation of its State income tax expense the years ended September 30, 2022 and 2021.