v3.26.1
Income Taxes
 12 Months Ended
Mar. 31, 2026
Income Tax Disclosure [Abstract]  
Income Taxes

Note 7 - INCOME TAXES

Income tax expense for the years ended March 31, 2026 and 2025, is summarized as follows:

 

 

 

Year Ended March 31,

 

 

 

2026

 

 

2025

 

Current

 

(Dollars in thousands)

 

Federal

 

$

711

 

 

$

484

 

State

 

 

168

 

 

 

130

 

Foreign

 

 

—

 

 

 

—

 

Deferred

 

 

 

 

 

 

Federal

 

 

112

 

 

 

255

 

State

 

 

—

 

 

 

—

 

Foreign

 

 

—

 

 

 

—

 

Total

 

$

991

 

 

$

869

 

 

The Association’s provision for income taxes for the years ended March 31, 2026 and 2025, differs from the amounts determined by applying the statutory federal income tax rate to income before income taxes as a result of the following:

 

 

 

Year Ended March 31,

 

 

 

2026

 

 

2025

 

 

 

Amount

 

 

% of Pretax Income

 

 

Amount

 

 

% of Pretax Income

 

 

 

(Dollars in thousands)

 

Expected income tax expense at statutory rates (21%)

 

$

1,048

 

 

 

21.0

%

 

$

950

 

 

 

21.0

%

Tax exempt interest

 

 

(20

)

 

 

(0.4

)

 

 

(21

)

 

 

(0.5

)

Investment partnership tax benefits, net of amortization

 

 

1

 

 

 

0.0

 

 

 

1

 

 

 

0.0

 

Other

 

 

(38

)

 

 

(0.8

)

 

 

(61

)

 

 

(1.3

)

Income tax expense

 

$

991

 

 

 

19.8

%

 

$

869

 

 

 

19.2

%

 

 

Deferred income taxes result from temporary differences in the recognition of income and expense for tax and financial statement purposes. The primary sources of these temporary differences relate to the timing of the recognition of allowances for credit losses, net operating losses, mortgage-backed securities premium amortization, employee benefits, mortgage servicing rights and the market adjustment of available-for-sale securities.

The deferred tax assets and the deferred tax liabilities measured at the federal tax rate of 21% at March 31, 2026 and 2025 are as follows:

 

 

 

Year Ended March 31,

 

 

 

2026

 

 

2025

 

 

 

(Dollars in thousands)

 

Deferred tax assets:

 

 

 

 

 

 

Allowance for credit losses

 

$

1,265

 

 

$

1,188

 

Employee benefits

 

 

312

 

 

 

456

 

Net operating loss acquired due to merger

 

 

302

 

 

 

337

 

Pre-1997 intangible asset

 

 

207

 

 

 

207

 

Fair value market adjustment for AFS securities

 

 

732

 

 

 

972

 

Other

 

 

215

 

 

 

127

 

Total deferred tax assets

 

 

3,033

 

 

 

3,287

 

Deferred tax liabilities:

 

 

 

 

 

 

Premises and equipment depreciation

 

 

590

 

 

 

405

 

FHLB stock dividends

 

 

55

 

 

 

49

 

Mortgage servicing rights

 

 

87

 

 

 

80

 

Prepaid expenses

 

 

73

 

 

 

50

 

Total deferred tax liabilities

 

 

805

 

 

 

584

 

Net deferred tax assets

 

$

2,228

 

 

$

2,703

 

 

The Association does not expect the total amount of unrecognized tax benefits to change significantly in the next twelve months. As of March 31, 2026 and 2025, the Association had federal net operating loss (NOL) carryforwards of approximately $1.4 million, and $1.6 million, respectively. These NOLs are scheduled to expire between 2030 and 2036 and are subject to annual utilization limitations under Section 382 of the Internal Revenue Code. During 2025, management assessed the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. Based on this assessment, and growth of the Association, the deferred tax asset is expected to be utilized in future years.

The amount of the deferred tax asset considered realizable, however, could be adjusted, and a valuation allowance recorded, if estimates of future taxable income during the carryforward period are reduced or if objective negative evidence in the form of cumulative losses is present and additional weight cannot be given to subjective evidence such as our projections for growth. Our projections for growth are based on growth within our deposit and loan portfolios and maintaining an adequate net interest margin.

The Association is permitted under the Internal Revenue Code to deduct an annual addition to a reserve for bad debts in determining taxable income, subject to certain limitations. This addition differs from the bad debt expense used for financial accounting purposes. Bad debt deductions for income tax purposes are included in taxable income of later years only if the bad debt reserve is used subsequently for purposes other than to absorb bad debt losses. For years beginning after December 31, 1995, the special provisions described above have been repealed. Because the Association does not intend to use the reserve for purposes other than to absorb losses, no deferred income taxes have been provided. Retained earnings at March 31, 2026 and 2025 include approximately $4.5 million, representing such bad debt deductions for which no deferred income taxes have been provided.

The Association does not have material uncertain tax positions.