Income Taxes
The components of the provision for income taxes for the years ended September 30, 2025, 2024 and 2023 were as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 | | 2023 |
| Current: | | | | | |
| Federal | $ | 7,453 | | | $ | 6,506 | | | $ | 7,167 | |
| | | | | |
| Deferred | (383) | | | (383) | | | (291) | |
| Provision for income taxes | $ | 7,070 | | | $ | 6,123 | | | $ | 6,876 | |
At September 30, 2025 and 2024, the Company had income tax receivable of $290,000 and $80,000, respectively, which is included in other assets in the accompanying consolidated balance sheets.
The components of the Company’s deferred tax assets and liabilities at September 30, 2025 and 2024 were as follows (dollars in thousands): | | | | | | | | | | | |
| | 2025 | | 2024 |
| Deferred Tax Assets | | | |
| Allowance for credit losses | $ | 3,800 | | | $ | 3,670 | |
| Allowance for OREO losses | 5 | | | 5 | |
| | | |
| | | |
| OTTI credit impairment on investment securities | 38 | | | 50 | |
| | | |
| | | |
| Accrued interest on loans | 68 | | | 69 | |
| | | |
| Deferred compensation and bonuses | 121 | | | 163 | |
| Reserve for loan commitments | 90 | | | 69 | |
| Operating lease liabilities | 646 | | | 331 | |
| Net unrealized losses on investment securities and investments in equity securities | 89 | | | 5 | |
| Other | 435 | | | 70 | |
| Total deferred tax assets | 5,292 | | | 4,432 | |
| | | | | | | | | | | |
| | | |
| Deferred Tax Liabilities | | | |
| Goodwill | 1,187 | | | 1,187 | |
| Loan servicing rights | 171 | | | 288 | |
| Depreciation | 997 | | | 815 | |
| Loan fees/costs | 1,108 | | | 1,044 | |
| | | |
| Prepaid expenses | 168 | | | 159 | |
| Purchase accounting adjustment | 83 | | | 110 | |
| | | |
| Operating lease ROU assets | 619 | | | 310 | |
| Other | — | | | 27 | |
| Total deferred tax liabilities | 4,333 | | | 3,940 | |
| | | |
| | | |
| | | |
| Net deferred tax assets | $ | 959 | | | $ | 492 | |
Net deferred tax assets are included in other assets in the accompanying consolidated balance sheets.
No valuation allowance for deferred tax assets was recorded as of September 30, 2025 and 2024, as management believes that it is more likely than not that all of the deferred tax assets will be realized based on management's expectations of future taxable income.
The provision for income taxes for the years ended September 30, 2025, 2024 and 2023 differs from that computed at the federal statutory corporate tax rate as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 | | 2023 |
| Expected federal income tax provision at statutory rate | $ | 7,609 | | | $ | 6,385 | | | $ | 7,139 | |
| | | | | |
| BOLI income | (357) | | | (135) | | | (148) | |
| | | | | |
| Dividends on Employee Stock Ownership Plan ("ESOP") stock | (58) | | | (58) | | | (71) | |
| Stock-based compensation tax effect | (95) | | | (37) | | | (66) | |
| Other, net | (29) | | | (32) | | | 22 | |
| Provision for income taxes | $ | 7,070 | | | $ | 6,123 | | | $ | 6,876 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.