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Federal Income Taxes
 12 Months Ended
Jun. 30, 2020
Income Tax Disclosure [Abstract]  
FEDERAL INCOME TAXES

NOTE I - FEDERAL INCOME TAXES


Federal income taxes on earnings differs from that computed at the statutory corporate tax rate for the years ended June 30, 2020 and 2019, as follows:


(in thousands)  2020   2019 
         
Federal income taxes at the statutory rate  $(2,579)  $200 
Increase (decrease) resulting primarily from:          
Cash surrender value of life insurance   (16)   (15)
Deferred tax liability adjustment, net, resulting from Kentucky tax legislation   14    (63)
Goodwill impairment   2,848    -- 
Other   (3)   19 
   $264   $141 

The composition of the Company’s net deferred tax liability at June 30 is as follows:


(in thousands)  2020   2019 
         
Taxes (payable refundable on temporary differences at estimated corporate tax rate:        
Deferred tax assets:        
General loan loss allowance  $371   $363 
Accrued expenses   164    113 
Fair value accounting adjustments on acquisition   199    223 
Nonaccrued interest on loans   118    102 
Other real estate owned adjustments   17    16 
Depreciation   37    38 
Charitable contributions   12    -- 
State net operating loss carryforward   --    170 
Total deferred tax assets   918    1,025 
           
Deferred tax liabilities:          
Federal Home Loan Bank stock dividends   (981)   (981)
Deferred loan origination costs   (33)   (48)
Loan servicing rights   (24)   (18)
Accrual to cash adjustment   (170)   (127)
Fair value accounting adjustments on acquisition   (547)   (552)
Total deferred tax liabilities   (1,755)   (1,726)
Net deferred tax liability  $(837)  $(701)

As discussed in Note A, in the fiscal year ended June 30, 2019, the Company recognized a tax benefit of $63,000 as a result of the tax legislation enacted by the Commonwealth of Kentucky in spring 2019. As a result of HB 458 on combined reporting, the Company recorded a deferred tax asset for the state net operating loss carryforward. The losses are expected to be utilized when the Company begins filing a combined Kentucky income tax return with the Banks. The loss carryforward expires beginning 2032.


Prior to 1997, the Banks were allowed a special bad debt deduction, generally limited to 8% of otherwise taxable income, and subject to certain limitations based on aggregate loans and deposit account balances at the end of the year. If the amounts that qualified as deductions for federal income taxes are later used for purposes other than bad debt losses, including distributions in excess of accumulated earnings and profits, such distributions will be subject to federal income taxes at the then current corporate income tax rate. Retained earnings at June 30, 2020, include approximately $5.2 million for which federal income taxes have not been provided. The amount of unrecognized deferred tax liability relating to the cumulative bad debt deduction was approximately $1.3 million at June 30, 2020.