Eagle Bancorp Montana, Inc. Income Taxes Disclosure

NOTE 11:

Income Taxes

 

The components of the Company’s provision (benefit) for income taxes was as follows:

 

		Years Ended
		December 31,
		2025				2024
		(In Thousands)
Current:
U.S. federal		$	3,332			$	1,575
States			1,300				566
Total current income tax provision			4,632				2,141
Deferred:
U.S. federal			(462	)			(435	)
States			(112	)			(94	)
Total deferred income tax benefit			(574	)			(529	)
Total income tax provision		$	4,058			$	1,612

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Components of the Company's deferred tax assets and liabilities were as follows:

 

		December 31,
		2025				2024
		(In Thousands)
Deferred tax assets:
Allowance for credit losses		$	4,565			$	4,433
Deferred loan fees			445				402
Lease liability			182				266
Deferred compensation			1,886				1,835
Employee benefits			584				625
Unrealized losses on securities available-for-sale			4,591				7,194
Acquisition costs			63				98
Acquisition fair value adjustments			2,430				2,757
Other			814				694
Total deferred tax assets			15,560				18,304
Deferred tax liabilities:
Premises and equipment			206				514
Right-of-use asset			311				436
Mortgage servicing rights			3,953				4,045
Goodwill			1,610				1,488
Intangibles			835				1,121
Other			312				336
Total deferred tax liabilities			7,227				7,940
Net deferred tax asset		$	8,333			$	10,364

 

The Company believes, based upon the available evidence, that all deferred tax assets will be realized in the normal course of operations. Accordingly, these assets have not been reduced by a valuation allowance.

 

A reconciliation of the Company’s effective provision (benefit) for income taxes to the statutory federal income tax rate was as follows:

 

		Years Ended
		December 31,
		2025								2024
						Percent of								Percent of
						Pretax								Pretax
		Amount				Income				Amount				Income
		(Dollars in Thousands)
US Federal Statutory Tax Rate		$	3,967				21.00	%		$	2,392				21.00	%
State and Local Income Taxes, Net of Federal Income Tax Effect			1,026				5.43				566				4.97
Tax Credits
Low-income housing tax credits			(954	)			(5.05	)			(968	)			(8.50	)
Non-taxable or non-deductible items:
Tax-exempt interest income			(277	)			(1.47	)			(295	)			(2.59	)
Income from bank-owned life insurance			(399	)			(2.11	)			(432	)			(3.79	)
Other
Low-income housing tax credits amortization			765				4.05				890				7.81
Other			(70	)			(0.37	)			(541	)			(4.75	)
Total		$	4,058				21.48	%		$	1,612				14.15	%

 

Investments in LIHTC projects are accounted for using the proportional amortization method. The proportional amortization method allows the investor to amortize the cost of the investment in proportion to tax credits and other tax benefits  received. The net investment performance is recognized in the statement of income as a component of income tax provision (benefit). Amortization of the investment in LIHTC projects was $765,000 for the year ended December 31, 2025 and $890,000 for the year ended  December 31, 2024. There is no non-income-tax related activity recognized from the investments in LIHTC projects.

 

The Company adopted ASU 2023-09 on a prospective basis for the year ended December 31, 2025. The following table presents income taxes paid, net of refunds received:

 

	Year Ended
	December 31,
	2025
	(In Thousands)
Federal income taxes paid	$	1,970
State income taxes paid(1)		1,187
Total income taxes paid	$	3,157
(1) State taxes in Montana made up substantially all of the tax effect in this category.