WESTAMERICA BANCORPORATION Income Taxes Disclosure
Note 10: Income Taxes
Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the amounts reported in the financial statements of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Amounts for the current year are based upon estimates and assumptions as of the date of these financial statements and could vary significantly from amounts shown on the tax returns as filed. Net deferred tax assets are included with other assets in the consolidated balance sheets.
The components of the net deferred tax asset is as follows:
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At December 31, |
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2025 |
2024 |
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(In thousands) |
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Deferred tax asset |
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Allowance for credit losses |
$ | 3,361 | $ | 4,309 | ||||
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Securities available for sale |
38,253 | 70,557 | ||||||
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State franchise taxes |
3,523 | 4,128 | ||||||
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Deferred compensation |
3,372 | 3,597 | ||||||
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Purchased assets and assumed liabilities |
200 | 259 | ||||||
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Post-retirement benefits |
303 | 337 | ||||||
|
Employee benefit accruals |
3,114 | 3,345 | ||||||
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Accrued liabilities |
531 | 973 | ||||||
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Premises and equipment |
1,182 | 1,201 | ||||||
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Lease liability |
6,448 | 5,244 | ||||||
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Limited partnership investments |
148 | 313 | ||||||
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Other |
70 | 72 | ||||||
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Total deferred tax asset |
60,505 | 94,335 | ||||||
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Deferred tax liability |
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Right-of-use asset |
6,448 | 5,244 | ||||||
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Intangible assets |
455 | 457 | ||||||
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VISA Class B shares |
328 | 28 | ||||||
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Total deferred tax liability |
7,231 | 5,729 | ||||||
|
Net deferred tax asset |
$ | 53,274 | $ | 88,606 | ||||
Based on Management’s judgment, a valuation allowance is not needed to reduce the gross deferred tax asset because it is more likely than not that the gross deferred tax asset will be realized through recoverable taxes or future taxable income. Net deferred tax assets are included with other assets in the consolidated balance sheets.
Pretax income from continuing operations is as follows:
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For the Years Ended December 31, |
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2025 |
2024 |
2023 |
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(In thousands) |
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Domestic |
$ | 156,686 | $ | 189,059 | $ | 221,579 | ||||||
| Foreign | - | - | - | |||||||||
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Total pretax income |
$ | 156,686 | $ | 189,059 | $ | 221,579 | ||||||
The provision for federal and state income taxes consists of amounts currently payable and amounts deferred as follows:
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For the Years Ended December 31, |
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2025 |
2024 |
2023 |
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(In thousands) |
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Current income tax expense: |
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Federal |
$ | 21,963 | $ | 29,297 | $ | 38,075 | ||||||
|
State |
15,522 | 19,533 | 23,731 | |||||||||
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Total current |
37,485 | 48,830 | 61,806 | |||||||||
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Deferred income tax expense (benefit): |
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|
Federal |
2,298 | 1,467 | (1,197 | ) | ||||||||
|
State |
730 | 126 | (798 | ) | ||||||||
|
Total deferred |
3,028 | 1,593 | (1,995 | ) | ||||||||
|
Provision for income taxes |
$ | 40,513 | $ | 50,423 | $ | 59,811 | ||||||
The Company did not have any income tax expense (benefit) in foreign jurisdictions.
The provision for income taxes differs from the provision computed by applying the statutory federal income tax rate to income before taxes (reported under ASU 2023-09 on a prospective basis), as follows:
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For the Year Ended December 31, |
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2025 |
2024 |
2023 |
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($ in thousands) |
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% |
% |
% |
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Federal statutory income tax |
$ | 32,904 | 21.0 | % | $ | 39,702 | 21.0 | % | $ | 46,532 | 21.0 | % | ||||||||||||
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Effect of: |
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State and local income taxes, net of federal income tax benefit1 : |
12,840 | 8.2 | % | 15,531 | 8.2 | % | 18,117 | 8.2 | % | |||||||||||||||
|
Tax credits |
(4,155 | ) | (2.7 | )% | (3,425 | ) | (1.8 | )% | (2,943 | ) | (1.3 | )% | ||||||||||||
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Nontaxable or nondeductible items |
(1,573 | ) | (1.0 | )% | (1,634 | ) | (0.9 | )% | (1,898 | ) | (0.9 | )% | ||||||||||||
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Other |
497 | 0.4 | % | 249 | 0.2 | % | 3 | - | % | |||||||||||||||
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Total |
$ | 40,513 | 25.9 | % | $ | 50,423 | 26.7 | % | $ | 59,811 | 27.0 | % | ||||||||||||
At December 31, 2025 and December 31, 2024, the Company had uncertain tax positions related to previous years’ tax returns which were under examination.
The Company classifies interest and penalties as a component of the provision for income taxes. For tax years 2025 and 2024, interest or penalties were recognized as a component of the provision for income taxes. At December 31, 2025, the tax years ended December 31, 2024, 2023 and remain subject to examination by the Internal Revenue Service and the tax years ended December 31, 2024, 2023, 2022 and remain subject to examination by the California Franchise Tax Board.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 26, 2016 | |
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.