AMES NATIONAL CORP Income Taxes Disclosure

Note 13. Income Taxes

 

The components of income tax expense for the years ended December 31, 2025 and 2024 are as follows (in thousands):

 

		2025				2024
Federal:
Current		$	3,783			$	1,366
Deferred			(110	)			(83	)
Total federal income tax expense			3,673				1,283
State:
Current			1,106				668
Deferred			60				72
Total state income tax expense			1,166				740
Total income tax expense		$	4,839			$	2,023

 

Total income tax expense differed from the amounts computed by applying the U.S. federal income tax rate of 21% to income before income taxes for the years ended December 31, 2025 and 2024 as shown in the following tables (in thousands):

 

		2025
		Amount				Percent of Pretax Income
Federal statutory rate		$	5,012				21	%
Increase (decrease) resulting from:
State taxes, net of federal tax benefit (1)			730				3	%
New Markets Tax Credits			(724	)			(3	%)
Valuation allowance			102				0	%
Tax-exempt interest			(342	)			(1	%)
Other			61				0	%
Effective income tax		$	4,839				20	%

 

(1) State taxes in Iowa make up greater than 50% of the tax effect in this category.

 

		2024
Income taxes at 21%		$	2,571
Increase (decrease) resulting from:
State taxes, net of federal tax benefit			392
New Markets Tax Credits			(725	)
Valuation allowance			112
Tax-exempt interest			(361	)
Other			34
Total income tax expense		$	2,023

 

Income taxes paid for the year ended  December 31, 2025 are as follows (in thousands):

 

		2025
Federal		$	3,871
Iowa			644
Total income taxes paid		$	4,515

 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2025 and 2024 are as follows (in thousands):

 

		2025				2024
Deferred tax assets:
Allowance for credit losses		$	4,206			$	4,054
Net unrealized losses on securities available-for-sale			5,768				12,380
State operating and alternative minimum tax carryforward			1,077				985
Accrued vacation			300				277
Off balance sheet reserve			207				197
Other deferred tax assets			414				383
Total deferred tax assets			11,972				18,276
Deferred tax liabilities:
Goodwill and other intangible assets			(1,524	)			(1,391	)
Bank premises and equipment			(1,159	)			(1,181	)
Deferred loan costs			(199	)			(204	)
Other deferred tax liabilities			(578	)			(528	)
Total deferred tax liabilities			(3,460	)			(3,304	)
Valuation allowance			(1,018	)			(916	)
Net deferred tax asset		$	7,494			$	14,056

 

The Company has approximately $792 thousand and $690 thousand of state income taxes associated with state net operating loss (“NOL”) carryforwards as of December 31, 2025 and 2024, respectively. The Company has recorded a valuation allowance against the tax effect of the NOL, as management believes it is more likely than not that such carryforwards will not be utilized.

 

The Company has approximately $226 thousand of state alternative minimum tax (“AMT”) credit carryforwards available to offset future state alternative minimum taxable income as of December 31, 2025 and 2024. The Company has recorded a valuation allowance against the tax effect of the AMT credit carryforwards, as management believes it is more likely than not that such carryforwards will not be utilized.

 

The Company and its subsidiaries file one income tax return in the U.S. federal jurisdiction and separate tax returns for the state of Iowa. The Company is no longer subject to U.S. federal income and state tax examinations for years before 2022.

 

The Company follows the accounting requirements for uncertain tax positions. Management has determined that the Company has no material uncertain tax positions and no material accrued interest or penalties as of or for the years ended December 31, 2025 and 2024 that would require recognition. The Company had no significant unrecognized tax benefits as of December 31, 2025, that if recognized, would affect the effective tax rate. The Company had no positions for which it deemed that it is reasonably possible that the total amounts of the unrecognized tax benefit will significantly increase or decrease within the next 12 months as of December 31, 2025 and 2024.