CASH 2017 Annual Report

132 The components of the net deferred tax asset (liability) at September 30, 2017 and 2016 were: September 30, 2017 2016 (Dollars in Thousands) Deferred tax assets: Bad debts $ 2,832 $ 2,044 Deferred compensation 1,548 1,345 Stock based compensation 3,436 265 Operational reserve 645 540 AMT Credit 1,869 5,563 Intangibles 5,235 393 Indirect tax benefits of unrecognized tax positions 266 216 Other assets 1,933 1,362 17,764 11,728 Deferred tax liabilities: FHLB stock dividend (425) (411) Premises and equipment (1,789) (1,913) Patents (842) (988) Prepaid expenses (673) (668) Net unrealized gains on securities available for sale (4,934) (12,348) (8,663) (16,328) Net deferred tax assets (liabilities) $ 9,101 $ (4,600) As of September 30, 2017 and 2016, the Company had a gross deferred tax asset of $1.3 million and $0.9 million, respectively, for separate company state cumulative net operating loss carryforwards, which was fully reserved for as the Company does not anticipate any state taxable income at the holding company level in future periods. In general, management believes that the realization of its deferred tax assets is more likely than not based on the expectations as to future taxable income; therefore, there was no deferred tax valuation allowance at September 30, 2017, or 2016 with the exception of the state cumulative net operating loss carryforwards discussed above. Federal income tax laws provided savings banks with additional bad debt deductions through September 30, 1987, totaling $6.7 million for the Bank. Accounting standards do not require a deferred tax liability to be recorded on this amount, which liability otherwise would total approximately $2.3 million at September 30, 2017 and 2016. If the Bank were to be liquidated or otherwise cease to be a bank, or if tax laws were to change, the $2.3 million would be recorded as expense. The provisions of ASC 740, Income Taxes, address the determination of how tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements. Under ASC 740, the Company recognizes the tax benefits from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination, with a tax examination being presumed to occur, including the resolution of any related appeals or litigation. The tax benefits recognized in the consolidated financial statements from such a position are measured as the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company’s tax reserves reflect management’s judgment as to the resolution of the issues involved if subject to judicial review. While the Company believes that its reserves are adequate to cover reasonably expected tax risks, there can be no assurance that, in all instances, an issue raised by a tax authority will be resolved at a financial cost that does not exceed its related reserve. With respect to these reserves, the Company’s income tax expense would include (i) any changes in tax reserves arising from material changes during the period in the facts and circumstances surrounding a tax issue, and (ii) any difference from theCompany’s tax position as recorded in the consolidated financial statements and the final resolution of a tax issue during the period.