Income Taxes

12 Months Ended

Jun. 30, 2020

Note 10: Income Taxes

The Company and its subsidiary file income tax returns in the U.S. federal jurisdiction and the States of Illinois and Missouri. During the years ended June 30, 2020 and 2019, the Company did not recognize expense for interest or penalties.

The provision for income taxes includes these components:


	2020			2019
Taxes currently payable	$	1,654		$	1,217
Deferred income taxes		(15	)		76

Income tax expense	$	1,639		$	1,293

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is shown below:


	2020			2019
Computed at the statutory rate of 21.0%	$	1,236		$	1,019
Increase (decrease) resulting from
Tax exempt interest		(16	)		(26	)
Cash surrender value of life insurance		(57	)		(56	)
State income taxes		441			329
Other		35			27

Actual tax expense	$	1,639		$	1,293

Tax rate as a percentage of pre-tax income		27.9	%		26.7	%

The tax effects of temporary differences related to deferred taxes shown on the consolidated balance sheets were:


	2020			2019
Deferred tax assets
Allowance for loan losses	$	1,776		$	1,802
Accrued retirement liability		677			651
Deferred compensation		468			422
Deferred loan fees		291			83
Postretirement health plan		264			170
Accrued vacation		66			46
MPF recourse liability		97			66
Deferred revenue Mastercard		23			27
Stock options – Directors		50			42
Restricted stock		11			(9	)
Accrued professional services		18			—
Other		7			12

		3,748			3,312

Deferred tax liabilities
Depreciation		(731	)		(426	)
Mortgage servicing rights		(204	)		(243	)
Deferred loan expense		(181	)		(182	)
Unrealized gains on available-for-sale securities		(1,940	)		(395	)
Prepaid expenses		(62	)		—

		(3,118	)		(1,246	)

Net deferred tax asset	$	630		$	2,066

Retained earnings at both June 30, 2020 and 2019, include approximately $2,217,000, for which no deferred federal income tax liability has been recognized. These amounts represent an allocation of income to bad debt deductions for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which would be subject to the then-current corporate income tax rate. The deferred income tax liabilities on the preceding amounts that would have been recorded if they were expected to reverse into taxable income in the foreseeable future were approximately $466,000 at both June 30, 2020 and 2019.