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Income Taxes | 12 Months Ended
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Jun. 30, 2012
Income Taxes: |
Income Taxes |
9. | Income Taxes:
The Corporation utilizes the asset and liability method of accounting for income taxes whereby deferred tax assets are recognized for deductible temporary differences and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment. The provision for income taxes for the periods indicated consisted of the following:
(In Thousands) | Year Ended June 30,
2012 |  | 2011 |  | 2010 |
Current: |  |  |  |  |  |
| Federal | $ 4,984 |  | $ 4,484 |  | $ (1,601 | )
| State | 1,662 |  | 1,643 |  | (155 | )
| 6,646 |  | 6,127 |  | (1,756 | )
Deferred: |  |  |  |  |  |
| Federal | 947 |  | 2,911 |  | 2,189 |
| State | 335 |  | 1,011 |  | 307 |
| 1,282 |  | 3,922 |  | 2,496 |
Provision for income taxes | $ 7,928 |  | $ 10,049 |  | $ 740 |
The Corporation’s tax benefit from non qualified equity compensation in fiscal 2012 was $9,000, while there were no deferred tax benefits from non-qualified equity compensation in fiscal 2011 or 2010. The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to net income (loss) before income taxes as a result of the following differences for the periods indicated:
| Year Ended June 30, |
| 2012 |  |  | 2011 |  |  | 2010 |
(In Thousands) | Amount |  | Tax Rate |  |  | Amount |  | Tax Rate |  |  | Amount |  |  | Tax Rate |
Federal income tax at statutory rate | $ | 6,558 |  |  | 35.0 | % |  | $ | 8,144 |  |  | 35.0 | % |  | $ | 649 |  |  |  | 35.0 | %
State income tax |  | 1,300 |  |  | 6.9 |  |  |  | 1,638 |  |  | 7.0 |  |  |  | 111 |  |  |  | 6.0 |
Changes in taxes resulting from: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Bank-owned life insurance |  | (66 | ) |  | (0.4 | ) |  |  | (70 | ) |  | (0.3 | ) |  |  | (70 | ) |  |  | (3.8 | )
| Non-deductible expenses |  | 33 |  |  | 0.2 |  |  |  | 31 |  |  | 0.1 |  |  |  | 25 |  |  |  | 1.4 |
| Non-deductible stock-based compensation |  | 110 |  |  | 0.6 |  |  |  | 172 |  |  | 0.8 |  |  |  | 26 |  |  |  | 1.4 |
| Other |  | (7 | ) |  | - |  |  |  | 134 |  |  | 0.6 |  |  |  | (1 | ) |  |  | (0.1 | )
Effective income tax | $ | 7,928 |  |  | 42.3 | % |  | $ | 10,049 |  |  | 43.2 | % |  | $ | 740 |  |  |  | 39.9 | %
Deferred tax assets at June 30, 2012 and 2011 by jurisdiction were as follows:
(In Thousands) | June 30,
2012 |  | 2011 |
Deferred taxes – federal | $ 5,873 |  | $ 6,812 |
Deferred taxes – state | 2,775 |  | 3,109 |
Total net deferred tax assets | $8,648 |  | $ 9,921 |
Net deferred tax assets at June 30, 2012 and 2011 were comprised of the following:
(In Thousands) | June 30,
2012 |  | 2011 |
Loss reserves | $ 13,858 |  | $ 15,194 |
Non-accrued interest | 237 |  | 248 |
Deferred compensation | 3,425 |  | 3,282 |
Accrued vacation | 281 |  | 226 |
Depreciation | 28 |  | - |
State taxes | 181 |  | 27 |
Other | 159 |  | 17 |
| Total deferred tax assets | 18,169 |  | 18,994 |
FHLB – San Francisco stock dividends | (3,015 | ) | (3,655 | )
Unrealized gain on derivative financial instruments, at fair value | (1,238 | ) | (603 | )
Unrealized gain on loans held for sale, at fair value | (2,133 | ) | (2,844 | )
Unrealized gain on investment securities | (399 | ) | (379 | )
Unrealized gain on interest-only strips | (53 | ) | (83 | )
Deferred loan costs | (2,683 | ) | (1,434 | )
Depreciation | - |  | (75 | )
| Total deferred tax liabilities | (9,521 | ) | (9,073 | )
| Net deferred tax assets | $ 8,648 |  | $ 9,921 |
The net deferred tax assets were included in prepaid expenses and other assets in the Consolidated Statements of Financial Condition. The Corporation analyzes the deferred tax assets to determine whether a valuation allowance is required based on the more likely than not criteria that such assets will be realized principally through future taxable income. This criteria takes into account the actual earnings and the estimates of profitability. The Corporation may carryback net federal tax losses to the preceding five taxable years and forward to the succeeding 20 taxable years. At June 30, 2012, the Corporation had no federal and $4.1 million in state net tax loss carryforwards. Based on management’s consideration of historical and anticipated future income before income taxes, as well as the reversal period for the items giving rise to the deferred tax assets and liabilities, a valuation allowance was not considered necessary at June 30, 2012 and 2011 and management believes it is more likely than not the Corporation will realize its deferred tax asset. In the quarter ended June 30, 2012, the Corporation recorded an $825,000 tax liability as a result of a prior period adjustment for fiscal 2009 and an $825,000 charge against retained earnings in stockholders’ equity, pursuant to ASC 740-10: “Income Taxes,” see Note 1 on “Income taxes.” A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended June 30, 2012, 2011, and 2010 is as follows (in thousands):
| 2012 | 2011 | 2010
Balance at July 1 | $ 1,961 |  | $ 1,961 |  | $ 1,961 |
Additions based on tax positions related to the current year | - |  | - |  | - |
Addition for tax positions of prior years | - |  | - |  | - |
Reduction for tax positions of prior years | - |  | - |  | - |
Settlements | - |  | - |  | - |
Balance at June 30 | $ 1,961 |  | $ 1,961 |  | $ 1,961 |
Retained earnings at June 30, 2012 included approximately $9.0 million (pre-1988 bad debt reserve for tax purposes) for which federal income tax of $3.1 million had not been provided. If the amounts that qualify as deductions for federal income tax purposes are later used for purposes other than for bad debt losses, including distribution in liquidation, they will be subject to federal income tax at the then-current corporate tax rate. If those amounts are not so used, they will not be subject to tax even in the event the Bank were to convert its charter from a thrift to a bank.

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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 Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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